(Bloomberg) — Shrinking platinum stockpiles, growing demand from carmakers and new uses being trotted out in the energy field are stoking producers’ expectations that prices of the metal are poised to rebound from a five-year low.
Production of the shiny metal, used for jewelry and in catalytic converters in cars, will fall short of consumption this year by about 500,000 ounces, according to a January estimate by Credit Suisse Group AG. That’s prompting industry leaders to debate how long it will take for buyers to use up reserves and start paying more for a less available product.
Platinum is “in its strongest position” in a decade, said Chris Griffith, chief executive officer of Johannesburg-based Anglo American Platinum Ltd., the industry’s largest producer. “The fundamentals are that demand is increasing.”
Griffith said he believes prices will begin trending upwards relatively soon. Meanwhile, Terence Goodlace, CEO of Impala Platinum Holdings Ltd., the second-biggest producer, sees increases further out, estimating it will be two to 2 1/2 years for excess supplies to be depleted, with prices starting to recover in the second half of next year.
“The above-ground stocks for us is still a very, very big thing,” Goodlace told reporters at a media round table.
Platinum’s lustrous appearance and durability make it popular for jewelry, while its chemical properties mean it’s well-suited for industrial applications. In southern Africa, source of more than 80 percent of mined platinum, the ore is typically produced with related metals such as palladium and rhodium, while in other regions it’s a byproduct of extracting other metals such as copper and nickel.
Stockpile Drop
Higher prices can’t come soon enough for an industry that’s been struggling for about four years.
Platinum’s price for immediate delivery fell to $1,161.88 an ounce on Feb. 24, the lowest since July 2009. It traded at $1,178.38 an ounce at 2:33 p.m. in Johannesburg and has been cheaper than gold since January.
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