Tight market foreseen for platinum

An announcement by automaker Ford in the United States that it is developing a catalytic converter for motor vehicle emission control which doesn’t require platinum recently sent the market into a tizzy, the precious metal being a favored ingredient for the manufacture of such devices. The impact of such a development on platinum producers would be dramatic, with emission control equipment currently consuming about 35% of the non-Communist world output. Growth of the market had been almost assured with more and more attention being paid to the environment these days.

Prior to the Ford announcement, international investment dealer Shearson Lehman Hutton released its Annual Review of the World Platinum Industry 1988, in which it projected a tight market for the precious metal through to 1991, with the onus for a strong performance thereafter resting on the shoulders of the investor.

Burgeoning fabrication and investment demand this year has been set against a slight increase in total supplies to the market, with a heavy resultant drawdown in market stocks, Shearson says. The price has fared well, recovering from its dip to $450(US) per oz following the October, 1987, market collapse. Shearson says industrial requirements (net of investment) were up on 1987 by 21%; over-all demand including investment rose by about 8.4%. Price rallies

Tightening supplies drove two strong rallies during the year, while also drawing increasing speculative activity; high for the year (to the first of December) in London was $615.10. Shearson projects an average price for platinum this year of $530, down from $556 in 1987. For 1989, values are expected to range between $500 and $675, and average about $565.

It is projected that between 1989 and 1993, the investor will have to absorb 2.31 million oz (12% of total supply) at an average 462,000 oz annually to keep the market in balance over the entire period. During the past four years, investment has amounted to about 2.05 million oz, or 512,500 oz per year, with the heaviest activity concentrated in 1987 and 1988.

In 1989 and 1990, particularly with the arrival of the Koala and Maple Leaf series of platinum coins in Australia and Canada, respectively, investment activity should easily absorb the available metal each year, if not require more, Shearson says.

During the early 1990s, after a period of small surpluses, the fundamental picture deteriorates and in 1993 the market surplus is expected to be about 627,000 oz. Top producers

South Africa is supplying about 80% of the world market, and the Soviet Union about 13%. In third place on the list is Canada, with total production (as a byproduct, mainly from mining operations in the Sudbury basin) this year of about 140,000 oz. Total mine production in 1988 in the non-communist world, according to Shearson, will be about 2.75 million oz.

Growth in mine supply will be concentrated in South Africa although the diversity of sources outside that country is also set to increase as recent exploration activity bears fruit. Soviet supplies to the West are expected to decline as local requirements absorb even larger quantities of material, particularly if plans for new local fertilizer and chemical plants go ahead.

In North America there is one producing platinum-palladium mine, the Stillwater operation in Montana. Gearing up for production in Canada is Madeleine Mines’ Lac des Isles project in northwestern Ontario.

Shearson estimates scrap platinum recovered this year from catalytic converters will amount to 150,000 oz, with that secondary source of the metal expected to grow by an average 14% annual rate.

Other uses for platinum include jewelry (30-35%) and in the chemical, petroleum, glass and electrical industries.

Lower production and higher costs are having their effects on the gold mining industry in South Africa and now a report by the country’s deputy finance minister is calling for lower mining taxes.

At the beginning of the current decade, South Africa produced 70% of the non-communist world’s gold; eight years later that figure has dropped to below 50%. It is estimated the country`s mining industry accounts for 10% of the South African government’s tax revenue.

According to the report, 15 major gold mines could be developed and production of the precious metal within the country extended to the year 2030 and beyond if the proposals are accepted.

Recently re-elected to a second one-year term as chairman of the International Lead Zinc Research Organization was George German of Noranda Sales. Elected treasurer of the group was Michael Hughes of Falconbridge. The organization, with headquarters in North Carolina and a membership of 58, approved a 1989 research budget of $3.4 million(US).

As part of its plans for a new cold mill complex at Hamilton, Ont., steelmaker Dofasco says it has begun the engineering work on a hot dip zinc galvanizing line to coat steel for automotive parts. The new line, to cost $150 million to $200 million, will produce grades of galvanized products such as exposed automotive parts which require rust proofing.

A mountain city in southern Bolivia called Potosi is facing a dilemma. A nearby hill known as Cerro Rico which was mined for its silver by the Spaniards centuries ago, is being looked upon again as a new source for the precious metal. The trouble is the hill has become a national symbol which would disappear if a planned open pit operation is undertaken. Reports say a survey of the size of the silver deposit available at Cerro Rico is expected to be completed in the spring of 1989.