New York: The price of platinum will probably rise 8% this year on investor and industrial demand, while a surplus of the metal is forecast to surge 40%, precious metals research company CPM Group said.
The average price of the metal used in vehicle pollution-control devices jumped 27% to $1,146.90 (Rs47,022) in 2006. The average this year has climbed to $1,248.95. Platinum futures reached a record $1,353.80 an ounce on 7 May. The surplus will increase to 897,000 ounces from 635,000 ounces in 2006, according to New York-based CPO Group.
“There is a large and growing surplus of platinum, but investors want to buy even more than that,” CPM managing director Jeffrey Christian said in an interview.
The surplus calculation reflects new supplies less fabrication consumption, without counting investment demand for physical metal, CPM Group said. Demand for platinum in catalytic converters, jewellery and chemical processes will probably increase 2.5% in 2007, compared with an estimated 4.7% increase in 2006, the research group said.
Supplies probably will climb 5.6% to 8.2 million ounces this year, compared with an estimated 8% increase in 2006, the commodities research firm said. “The automotive sector continues to be the most vibrant for platinum use,” CPM Group said. “Jewellery and Chinese demand may continue to decline this year.” The price of platinum fell on Wednesday by the most in three months as investors shifted to bonds amid higher yields.
Platinum futures for July delivery fell $23.40, or 1.8%, to $1,268.30 an ounce on the New York Mercantile Exchange on Tuesday. The percentage drop was the biggest since14 March. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Global platinum supplies exceeded demand last year, leading to the first surplus since 1998, London-based metals trader and manufacturer Johnson Matthey Plc. said last month. The average price of palladium, also used in car exhaust systems, will climb 12% this year after surging almost 60% in 2006, Christian said.
Palladium futures averaged $323.95 an ounce last year. The price has averaged $360 this year. “The palladium surplus is shrinking” because of demand by automakers and investors, Christian said.
Palladium reached a four-year high of $409 an ounce on 12 May 2006. Futures for September delivery fell $4.35, or 1.2%, to $371 an ounce today. Supplies will lag behind demand, the research group said. Consumption probably will climb 6.5% this year, while supplies are expected to rise 5.3%, CPM Group said.
Last year, demand for the metal rose 11%, while production increased an estimated 3.1%, the research group said.
“Automotive use of palladium is projected to continue to increase this year, but growth in this sector may not be as robust as in previous years,” CPM said. “Palladium use in the electronics and dental sectors also are expected to increase this year, continuing the trend from last year.”
Demand for rhodium will outpace supplies this year, CPM said. The average price rose 50% in the five months ended May to $5,852 an ounce. The metal more than doubled last year from 2005.
The record price was $7,000 in January 1991. The deficit of the metal will widen to 24,323 ounces this year from 112,300 in 2006, CPM said. Rhodium is used in auto catalysts, as an alloy of platinum in glass-making equipment, and in some chemical-process catalysts, plating and electronic components.