Platinum Jewelry Demand May Rise

While the global supply of platinum is forecast to be in deficit by 240,000 ounces in 2008, and demand overall expected to fall by 2.3 percent for the year, demand for platinum jewelry, specifically, may rise in 2009 if prices stabilize.

These were among the findings presented by Johnson Matthey at its Platinum 2008 Interim Review, Tuesday in New York.

In 2008, the rising price of platinum—topping $2,200 an ounce in the first half—had a negative impact on jewelry manufacturing. As prices rose, recycling of old platinum jewelry, especially in China and Japan, further depressed net demand. But as dismal news from the financial sector hit in the third quarter, prices of precious metals, including platinum, dropped significantly. At press time, the spot price of platinum was $824 an ounce, while gold dropped back to $741 after topping $1,000 an ounce earlier in the year.

The bigger drop in platinum prices compared to gold prices could be attributed to the fact that platinum is predominantly an industrial metal, while gold is more of a financial metal, explained Timothy Murray, U.S. general manager of precious metals marketing for Johnson Matthey North America.

A number of factors contributed to the decline in platinum supply in 2008, many of which are related to issues in South Africa, such as lack of skilled labor, bad weather and flooding at some mines, and power supply. While supplies from South Africa should recover somewhat in 2009, power supply issues could affect further development and exploration. Industrial demand for the metal also is likely to drop further, and investment demand isn’t likely to increase significantly.

Other platinum group metals’ forecasts also were presented at the breakfast. Palladium, especially, has been hard hit, with spot prices falling to $210 an ounce at press time after hitting a high of $590 an ounce in March, and predictions that if economic conditions worsen it could drop as low as $125 an ounce.

As a result, two North American palladium producers have scaled back. North American Palladium Ltd. last month suspended operations at its Lac des Iles mine northwest of Thunder Bay, Ontario, citing the drop in metal price, while Billings, Mont.-based Stillwater Mining Co. announced Monday that it will restructure its operations and reduce and redeploy portions of its workforce. The move mainly affects operations at the company’s East Boulder mine, which has temporarily closed, though employees at the company’s Stillwater Mine in Nye, Mont., and in other areas are affected also. 

Rhodium, another platinum group metal, soared to a record $10,000 an ounce in June, by dropped back to under $2,000 an ounce in October. Johnson Matthey experts predict that market will be close to balance in 2009.