Platinum prices averaged $1,650 in 2010, a 36.1% increase over 2009, CPM reported in its annual Platinum Group Metals Yearbook.
Author: Dorothy Kosich
Precious metals consultants CPM said total global platinum supply rose during 2010, as platinum mine supply increased for the first time in three years.
In the CPM Group’s Platinum Group Metals Yearbook 2011 made public Tuesday, CPM said global platinum mine production is estimated to have increased 2.1% to 6,469,000 ounces in 2010, much of the increased mine supply being driven by increased production at South African mines.
RSA mine supply is projected to increase another 5.3% to around 6,813,000 ounces of platinum this year. However, the cost of mining PGM in South African increased 14.3% in 2010, mainly due to rising labor and power costs.
PGM cash costs are expected to rise further this year in South Africa-ranging from 5%-20%–despite increased efforts among some mining companies to manage costs.
Annual global refined platinum supply rose for the first time in 2010, following three consecutive years of declines. Platinum supply totaled 7.4 million ounces last year, a 4.9% increase over 2009.
Total refined platinum supply is forecast to rise 6.2% this year to 7.9 million ounces, said CPM. “The ramp up of new mining operations and restarted mining operations as well as increased secondary supply is expected to push total supply higher.”
CPM anticipates a 3.01% increase in total platinum fabrication demand to around 7.34 million ounces this year, compared to 7.128 million ounces in 2010. Nonetheless, the March 11th earthquake and tsunami in Japan resulted in a negative impact that is expected to limit fabrication demand for PGMs, particularly in the second and third quarters of this year.
Platinum demand from the electronics sector rose to 305,000 ounces in 2919, up 15.5% year-on-year. However, platinum jewelry declined from 2.3 million ounces in 2009 to 1.9 million ounces in 2010, which was attributed to higher metal costs.
Automotive platinum demand was at 3.1 million ounces in 2010, up 12.6% from 2009. CPM forecasts that platinum auto catalyst demand will rise 5.9% to 3.3 million ounces this year.
Meanwhile, investors purchased large volumes of platinum last year as six new platinum ETFs were launched, the highest number of launches for any given year. Investors added around 551,000 ounces of platinum to combined ETF holdings last year.
“During 2010, even though there was real economic growth globally, there continued to be many investors that remained extremely concerned about the sustainability of the recovery and the potential for another recession,” CPM observed. “This resulted in several investors purchasing precious metals like gold, silver, and platinum as safe haven investments.”
“Price supportive fundamentals are expected to keep investors interested in platinum during 2011 as well.”
CPM also noted that platinum coin fabrication is expected to increase to 22,000 ounces this year. “Production capacity at mines that make platinum coins is expected to free up slightly as gold and silver coin demand growth slows.”
Total global palladium supply rose 6.5% to 8.4 million ounces last year, an increase driven primarily by increased secondary recovery of the metal. Refined palladium supply is forecast to rise to 9 million ounces in 2011, up 6.9% from 2010.
South African palladium production exceeded Russian palladium production for the first time since 2002. Mine supply is forecast to rise to 3 million ounces this year, a 5.6% increase over 2010.
Total global mine production rose 3% to 6.8 million ounces of palladium in 2010 and is projected by CPM to rise 5.9% this year to 7.1 million ounces.
Fabrication demand for palladium rose 7% to nearly 7.5 million ounces in 2010, reflecting increased demand from auto catalysts and electronics sectors. Palladium fabrication demand is projected to rise to a record 7.9 million ounces this year, up 5.2% from 2010.
Total palladium jewelry demand declined from 629,000 ounces in 2009 to 529,000 ounces in 2010.
The amount of newly refined palladium entering the market in excess of fabrication demand is expected to increase to around 1.1 million ounces this year, according to CPM.
“Palladium investment demand has played an extremely important role in driving palladium prices higher during the past couple of years,” said CPM. “Increased interest among investors regarding commodities, strong supply and demand fundamentals of palladium, and an explosion of exchange traded funds have all helped to boost investment demand for the metal.”
In 2010, investors made net addition of 1.03 million ounces to their palladium holdings.
CHINA REVIEW AND OUTLOOK
China is the largest consumer of platinum jewelry in the world, as well as one of the largest consumers of PGMs. It had very few mines with recoverable PGMs resources.
The largest PGM-producing mine in China is the Jinchuan nickel mine in Gansu province, which produces more than 90% of China’s PGM mine production.
It is estimated that around 67,796 ounces of platinum and 41,936 ounces of palladium were mined in China last year. Chinese PGMs mine production is expected to remain flat this year.
In 2010, net imports of platinum were reported at 2.4 million ounces, up 40% from 2009. Reported net imports of palladium also rose 16.5% year-on-year to 939,000 ounces in 2010.
CPM said total Chinese platinum fabrication demand fell 8.1% year-on-year to 2.2 million ounces last year, which was attributed to a 19.2% decline in platinum jewelry demand to 1.4 million ounces. Nevertheless, CPM predicts platinum jewelry demand will improve in 2011.
In 2010 around 433,600 ounces of platinum is expected to be used in auto catalysts, a nearly 30% increase over 2009.
Palladium fabrication demand grew 10.5% to around 1.3 million ounces last year, fueled by increased demand from the automotive, electronics, and petroleum refining sectors. Palladium jewelry demand declined.
Palladium demand from auto catalysts is estimated to have grown 45.6% year-on-year to 692,941 ounces in China last year.