‘Enormously tight’ market could see platinum peak above $2 400/oz - Investec

A portfolio manager at financial institution Investec said on Tuesday that the platinum price was expected to close this year at levels above $2 400/oz, in an "enormously tight" market.

Investec's forecasts were that there would be a supply deficit of 400 000 oz of the white metal this year, but other market watchers were calling for a deficit of as much as 600 000 oz, Gail Daniel stated.

This came as producers in South Africa, where some 70% of the world's supply is mined, wrestled with the power supply quandary, safety setbacks and skills shortages.

Daniel, who is responsible for the Investec Equity Fund and the Investec Managed Fund, said that both supply and demand for platinum, used in pollution reduction devices in diesel engines, were inelastic.

She said that while the demand for platinum jewellery might slip because of the metal's current high prices, investor demand would offset this.

Daniel was also quick to point out that demand for platinum was legislation driven, and that the burgeoning vehicle sector in developing countries like China would also push demand higher.

Platinum was trading around the $1 980/oz level on Tuesday, after having peaked at $2 308,80/oz in early March.

The world's biggest producer, Anglo Platinum (Angloplat), had suffered production setbacks after its Amandelbult mine was flooded in January this year.

Last year, it also shed thousands of ounces in a drive to improve its safety record.

Number-three producer Lonmin also disappointed the market by failing to meet its output forecasts.

Another official at Investec pointed out that it would be difficult for Angloplat to boost its output levels until it appointed a new permanent CEO, after its former chief Ralph Havenstein quit the company nine months ago.

Norman Mbazima and Duncan Wanblad had been acting jointly in the position since. The company has indicated that it will announce its new chief by the end of June.