ab cd Platinum|2004 2004 Platinum Interim Review Interim Review 16th November 2004 16th November 2004
Platinum • Demand to edge up to 6.47 million oz Demand to edge up to 6.47 million oz • • Good growth in auto & industrial demand Good growth in auto & industrial demand • • Purchasing by Chinese jewellers slides Purchasing by Chinese jewellers slides • • Supplies to grow to 6.43 million oz • Supplies to grow to 6.43 million oz • Market moving close to balance • Market moving close to balance • Fund long positions help to support the price Fund long positions help to support the price • www.platinum.matthey.com •Demand for platinum to be 6.47 million oz in 2004. That’s only a 1% increase on last year and the same amount of demand as in 2002. •This year there is good growth in autocatalyst and industrial demand for platinum, and I’ll examine this in more detail as we go on. •Offsetting most of this increase, purchasing by Chinese jewellers has fallen significantly. •Supplies will be a record, growing by 4% to 6.43 million oz. •So we expect the platinum market to be slightly under-supplied this year, which will be the sixth year in a row that supply has failed to meet demand. •The price of platinum has averaged a record $845 per oz in the first 10 months of 2004, supported by hedge fund and other investor buying and the firmness of overall demand.
Platinum Demand by Application Platinum Demand by Application Autocatalyst: +7% Autocatalyst: +7% 3,210 3,430 3,500 RoW 3,000 2,500 N.America 2,000 Japan '000 oz 1,500 Europe 1,000 500 0 2003 2004 www.platinum.matthey.com Autocatalyst demand for platinum is forecast to rise by 7% in 2004 to 3.43 million oz Most of the growth will be in Europe, where autocatalyst platinum demand is expected to rise by 220,000 oz to 1.59 million oz – that’s over 45% of all demand in this sector. Demand in Japan and the Rest of the World is forecast to increase a little, but purchases by the North American auto industry will slip.
Diesel share of European Diesel share of European new car sales, 1999 vs 2004 new car sales, 1999 vs 2004 1999 2004 Diesel Diesel Gasoline Gasoline www.platinum.matthey.com What’s happening in Europe is a continuation of the trend of recent years – the persistent growth in sales of diesel cars in Europe. In 1999, diesels accounted for less than 30% of new car sales, this year almost one in every two cars sold in the region will be diesel powered. By the end of next year the proportion is almost sure to be over 50%.
European Demand for Platinum European Demand for Platinum in Autocatalysts 1999 - - 2004 2004 in Autocatalysts 1999 '000 oz 2,000 1,750 1,500 1,250 1,000 750 500 250 0 1999 2000 2001 2002 2003 2004 Pt in Diesel Pt in Gasoline www.platinum.matthey.com Driven by the diesel car sector, European auto demand for platinum has nearly trebled since 1999, (diesel catalytic converters are only able to use platinum at present). As this chart of how platinum is used in the European auto industry shows, diesel autocatalyst demand for platinum in 2004 (dark blue segment) will be nearly 4 times the level of 1999 (1.29 million oz). You should also be able to detect on the chart (light blue segment) a slight reduction in the use of platinum in catalysts for gasoline engine cars, as auto companies have been switching some models over to palladium catalysts.
Autocatalyst demand: emission Autocatalyst demand: emission regulations tightening regulations tightening Europe: Euro IV from Jan. 2005 Japan: National HDD regulations from Oct. 2005 Other Asia: China, South Korea, India, Thailand… USA: Tier 2 phase-in from Jan 2004 www.platinum.matthey.com Tightening emissions standards are also contributing to higher platinum demand, both for this year and into 2005. All the major vehicle markets are introducing new phases of legislation, as this list demonstrates. The new European rules are leading to higher average loadings of platinum on catalysts for diesel cars and in some cases fitting an additional catalysed diesel particulate filter. We are also already seeing the use of catalysts and filters on heavy vehicles in Japan to meet the forthcoming regulations.
Platinum Demand by Application Platinum Demand by Application Jewellery: - Jewellery: -10% 10% 2,440 2,200 2,500 RoW 2,000 Europe 1,500 '000 oz N.America 1,000 Japan 500 China 0 2003 2004 www.platinum.matthey.com Purchases of platinum for jewellery manufacture are forecast to fall by 10% in 2004 to 2.20 million oz. This is due almost entirely to a contraction in Chinese demand, which will drop for the second year in succession. Chinese purchases of platinum for jewellery are expected to slide from 1.2 million oz in 2003 to 960,000 oz this year.
Falling Chinese Jewellery Demand Falling Chinese Jewellery Demand for Platinum – – Why? Why? for Platinum Higher platinum price: Metal costs up but retail prices static = lower profit margins Lower margins = increased production of WG plus addition of Pd jewellery Platinum stock levels reduced throughout the trade Greater competition in stores from less expensive WG www.platinum.matthey.com The strength of the platinum price has affected purchases of the metal by Chinese jewellers in several ways: While the average platinum spot price has risen significantly in 2004, retail prices of platinum jewellery in China have remained largely static due to the very competitive nature of the market. Consequently, profit margins on platinum jewellery have been squeezed. In particular, margins were heavily pressured during March and early April, when the platinum price surged to a peak of $937. Jewellers consequently switched an increased proportion of output to more profitable white gold, and many also began producing palladium jewellery. The strength of the platinum price has also encouraged increased recycling of old platinum jewellery stock by retailers and wholesalers At the retail level, plain platinum jewellery has faced greater competition from less expensive white gold, but sales of higher-margin gem-set platinum jewellery are rising.
Demand for Platinum Demand for Platinum in Jewellery – – Other Markets Other Markets in Jewellery Retail sales fall in Japan but less inventory recycling High Pt price = pressure on market share in USA UK bridal the bright spot in Europe www.platinum.matthey.com In Japan, retail sales of platinum jewellery have weakened further but, after several years of substantial stock reduction, less inventory is likely to be recycled by retailers and wholesalers this year. As a result, purchases of metal by manufacturers are expected to improve slightly. In the USA, as elsewhere, the strength of the platinum price has resulted in a loss of sales to alternative white metals in the fashion sector of the market and demand is down a little. The UK bridal market remains the one area of substantial growth for platinum jewellery sales in Europe.
Platinum Demand by Application Platinum Demand by Application Industrial: +9% Industrial: +9% 1,400 1,530 1,600 Petroleum 1,400 1,200 Glass 1,000 Electrical 800 '000 oz 600 Chemical 400 Other 200 0 2003 2004 www.platinum.matthey.com Demand for platinum in industrial applications is forecast to grow 9% in 2004 to 1.53 million oz. Use of platinum in catalysts for the bulk chemicals industry (silicones, paraxylene) and in hard disc drives will both increase this year but the fastest rate of growth will be seen in the glass industry. This is due to a major phase of expansion in LCD glass manufacturing capacity in Asia, which means higher demand for platinum-rhodium equipment. Glass demand for platinum is projected to climb by 45% to 240,000 oz in 2004.
Platinum Demand by Application Platinum Demand by Application ‘000 oz 000 oz ‘ 2003 2003 2004 2004 % change % change Autocatalyst: gross 3,210 3,430 7 Autocatalyst: gross 3,210 3,430 7 recovery (645) (695) 8 recovery (645) (695) 8 Jewellery 2,440 2,200 (10) Jewellery 2,440 2,200 (10) Industrial 1,400 1,530 9 Industrial 1,400 1,530 9 Investment Investment 15 15 5 5 (67) (67) TOTAL DEMAND TOTAL DEMAND 6,420 6,420 6,470 6,470 1 1 www.platinum.matthey.com To recap: with autocatalyst and industrial demand for platinum growing robustly but purchases from the jewellery sector falling, total demand for platinum this year will grow by just 1% to 6.47 million oz. Turning to platinum supply:
Platinum Supply by Region Platinum Supply by Region Total supply: +4% Total supply: +4% 6,200 6,430 7,000 Other 6,000 5,000 N. America 4,000 '000 oz 3,000 Russia 2,000 South 1,000 Africa 0 2003 2004 www.platinum.matthey.com Total supply of platinum is forecast to rise 4% to 6.43 million oz this year. Output from South Africa will lead the growth. We project 4.98 million oz, which is an 8% increase on 2003. North American production is also expanding, but we expect a drop in sales of metal from Russia.
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