Platinum

From IntFX

Commodities Portal

1 Platinum Group Metals
2 Platinum
3 General uses
4 Pricing structure
5 Current consumption trends
6 Price forecasts
7 Major producers
8 External References

[edit] Platinum Group Metals

The six platinum group metals (PGMs) platinum, palladium, iridium, rhodium, ruthenium and osmium are not everyday names.

Platinum - Platinum, with its natural white lustre, is probably best known for its use in jewellery. However, jewellery only represents about 40% of the overall platinum use. Around 37% are used for catalytic converters, with the remaining approximately 23% being used in other industrial applications around the world.

Palladium - Like platinum, palladium has a natural white lustre. Although it has the lowest melting point of all platinum group metals (PGMs) and is also the least dense, palladium's remarkable qualities mean that it is no less crucial in a number of important applications.

Iridium - The rarest of the PGMs, iridium is second only to osmium as the densest element and is the most corrosion resistant known. It is white with a yellowish hue.Although brittle, it is extremely hard (over 4 times that of platinum itself) and with its high melting point, temperature stability and corrosion resistance, is used in high-temperature equipment such as the crucibles used to grow crystals for laser technology.

Rhodium - Rhodium has a cool-gray colour and is known to be extremely hard and corrosion resistant. Like its sister metals platinum and palladium, rhodium also has excellent catalytic activity. Many complex chemical compounds have been developed for use as catalysts, especially in the organic chemicals industry. Rhodium-platinum gauzes are used in the production of nitric acid.

Ruthenium - Pure ruthenium, a cool white metal, is rarely used by itself because it is extremely difficult to work. It remains hard and brittle even at temperatures as high as 1500°C. Ruthenium is, however, a useful addition to platinum and palladium to impart hardness in certain jewellery alloys and to improve resistance to abrasion in electrical contact surfaces. In the electronics and chemicals industries, ruthenium has some important applications on account of its electrical and electrochemical properties, good catalytic properties, good catalytic activity, resistance to corrosion and stability under varying operating conditions. ^[1]

[edit] Platinum

Platinum is a chemical element. A heavy, malleable, ductile, precious, gray-white transition metal, platinum is resistant to corrosion and occurs in some nickel and copper ores along with some native deposits. Platinum is used in jewelry, laboratory equipment, electrical contacts, dentistry, and automobile emissions control devices. Platinum is more precious than gold. The price of platinum changes along with its availability, but its price is normally more than 200% of the price of gold.

Platinum possesses high resistance to chemical attack, excellent high-temperature characteristics, and stable electrical properties. All these properties have been exploited for industrial applications.

[edit] General uses

Platinum is primarily an industrial metal. It is a critical material for many industries and is considered a “strategic metal” by the US Government as a military resource. It is estimated that about 20% of the products purchased by modern consumers either contain platinum or use it in production. Total demand for platinum falls into eight broad categories:

Automotive – used in catalytic converters, spark plugs, and sensors
Jewellery – as a substitute for gold
Chemical processing – also as a general catalyst
Electrical/electronics – for high-temperature and non-corrosive wires and contacts
Glass – dies and process technology
Petroleum refining – as a catalyst for crude oil cracking
Dental/Medical – equipment and reconstructive
Investment – bullion and coins^[2]

[edit] Pricing structure

After a period of relative stability (between 1991 and 1999), prices of platinum have increased continually until the first quarter of 2004. The volatility of platinum prices on the period 1994-1999 was about 4.3 % whereas the bullion gold volatility on the time period was about 5.2 %. On the period 1999-2004 the volatility of platinum has sharply increased to reach 11.5 % while the gold volatility was about 6.7 %.

It is quite interesting to point out that, platinum prices have received the support of strong demand on that period to show a volatility index almost three times bigger than the previous period of 1994-1999. This huge rise concerning platinum is basically due to the jewellery sector (more particularly China and Japan) and to the autocatalyst sector (in accordance with environmental issues). ^[3]

[edit] Current consumption trends

Industrial usage of platinum is forecast to continue rising this year, up 40,000 ounces or 2.1% to 1.91 million ounces, with the automotive industry providing the main source of growth.

Heavy-duty diesel vehicles have just started to have catalysers fitted. This market is in its infancy, and further tightening of US and European emissions standards would require more platinum per vehicle. Auto catalyst makers, however, are continually seeking ways of reducing platinum usage in each catalyser. Manufactures can use palladium as a cheaper alternative.

Increasing usage of fertilizers to meet rocketing biofuel demand has also increased platinum consumption in the catalyst gauzes used in nitric acid production.

Rising prices, on the other hand, continue to weigh on jewelry demand, which has been falling since 2002 and is forecast to fall 25,000 ounces, or 1.5%, to 1.60 million ounces this year. However, China has seen a small increase in jewelry demand and sales are also reported to have been strong in the UK and Switzerland, but much weaker in the US and Japan, which account for 95% of the platinum jewelry demand.

While the western world’s industrial demand is understandably a function of economic growth, which increases at a moderate rate, demand for platinum in countries with emerging economies--like China and India--is exploding.

It is well known that China has enjoyed the highest percent of annual economic growth of any nation in the world during the last ten years. And there doesn’t seem to be any slowing in the foreseeable future. The country’s platinum consumption has grown apace with its annual industrial production increases. China’s future platinum demand alone will tax the current production capacity of the four major mines.^[4]

[edit] Price forecasts

Platinum hit record highs as the protracted power crisis in producer South Africa, which accounts for 80 percent of global output, spurred buying from investors and auto makers.

Platinum jumped as high as $1,744/1,748 an ounce from $1,730/1,735 late in New York on Thursday. The metal surged 37 percent in 2007 and added 14 percent more so far this year. Here are some major forecasts:

Standard Bank said it expects platinum prices to average 1,900 usd an ounce in 2008 as the supply deficit in the platinum market widens amid supply outages in major producer South Africa. The bank said it expects the market to record a deficit of 400,000 ounces in 2008 against a shortfall of 265,000 ounces the previous year.^[5]

Barclays Capital revised its 2008 average platinum price up to $1,740/oz from $1,620/oz following the recent spate of energy problems in South Africa.^[6]

UBS lifted its platinum price forecast to $1,800 an ounce in 2008, $2,100 the next year and $2,300 in 2010 from previous predictions of $1,520, $1,450 and $1,375 respectively.^[7]

Citibank said Tuesday it has increased its 2008 estimate to $1,696/oz from $1,270/oz. It also upped its 2009 estimate to $1,500/oz from $1,150/oz and 2010 to $1,500/oz from $1,025/oz. Citi said the new platinum forecasts are between 30% and 46% higher than existing estimates while Lehman brothers analyst Michael Widmer said the platinum market may see another "sizable" deficit in 2008 following the energy problems in South Africa, setting the scene for another year of high prices. ^[8]

JP Morgan had seen platinum trading around the 1,300-1,320 usd per ounce (level) in H1 2008. It is now likely that the price will be closer to the 1,350-1,400 usd area in this period.^[9]

[edit] Major producers

Platinum is found at much lower grades than gold or silver. On average, ten tons of ore must be mined--sometimes miles underground at temperatures greater than 120ºF--to produce a single ounce of platinum.

Relative to volume mined, platinum has more industrial uses than either silver or gold. In fact, more than 50% of the world’s annual production of platinum is used in industry. Most of the rest goes toward jewelry manufacturing (about 40%) and investment (about 10%). This is unlike gold, where most of supply is used for jewelry (about 70%) and investment (about 20%).

Also unlike gold, there are no large inventories of above-ground platinum. Therefore, a breakdown in major supply sources could catapult platinum prices into orbit.

Unlike most other commodity metals, which are found throughout the world, major platinum deposits are limited to two main areas: South Africa and the Commonwealth of Independent States (the former USSR).

And South Africa is by far the more important of the two, as it accounts for approximately 80% of the world’s total annual mine production. South Africa also accounts for 88% of the world’s platinum reserves, with a proved and probable reserve estimate of 6,223 tons, or 223 million ounces.

It’s also interesting that more than 90% of the world’s platinum production comes from only four mines--three in South Africa and one in the CIS.^[10]