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Johannesburg - Johnson Matthey expects South African platinum output to increase "very modestly" in 2009, but this is an extremely difficult forecast to make, said Alison Cowley, the principal analyst at the leading platinum refinery.
In its 2008 interim review, JM forecasts the 2008 platinum market to be in a slight deficit of 240 000 ounces.
This scenario was plotted before Anglo Platinum said it would shift the production of up to 200 000 refined platinum ounces into 2009, because of a shutdown of its Polokwane smelter where a furnace sprung a leak.
"We still see the market in deficit for the year (2008), but we won't give a figure," said David Jollie, the writer and editor of JM's research publications.
JP Morgan and RBC Capital Markets have forecast a platinum surplus in 2009 of 750 000 oz and one million oz respectively. JM declined to give an outlook for 2009, but said output could increase slightly from the 2008 number.
JM expects the platinum price range for the next six months to swing between $700/oz and $1 400/oz. This sounds like an enormously wide target, but taken in the context of developments in the platinum market so far this year, it's entirely reasonable.
The platinum price shot up to a life-high of $2 276 in March on concerns about supplies from South Africa before skidding down to $1 004 by the end of September as the global economy soured, curbing demand for motor vehicles, the key offtake sector for platinum.
South Africa is the world's single largest source of platinum.
Platinum supply in 2008 will fall to 6.28 million oz, 275 000 oz below the previous year's level. Demand this year is seen at 6.52 million oz, 155 000 lower than that in 2007.
European purchases of platinum to make autocatalysts for motor exhausts will offset weakness in North America. Total autocatalyst demand for platinum is predicted to be 2.1% higher at 4.5 million oz.
The platinum price is now $819, prompting warnings that many producers are unable to mine platinum profitably.
This will be an important factor for the supply and demand equation for next year. The majors have announced they are reviewing their capital expenditure plans and expansion projects.
Project revision rife
Lonmin is shutting unprofitable mines, including suspension of opencast operations at Marikana, putting the Akanani project into mothballs and cutting back on mechanisation at its mines to bolster productivity.
Lonmin says its 2009 production is forecast to be similar to that of 2008 at about 727 000 oz because of increased output from Marikana's underground operations.
"PGM prices are now some way below the cash cost of production for a significant proportion of the industry and the longer this situation prevails, the more companies, including Lonmin, will need to take action to protect their financial position," Lonmin CEO Ian Farmer said.
"We anticipate a sharp decline in investment in the industry in the short term, which could include shaft closures and mothballing, resulting in reduction or deferment in the supply of PGMs. This increases the possibility of a rebound in pricing once sentiment and markets improve."
Eastern Platinum is holding back on its Crocette project at its key operations, and pushed back the development of new projects on the Eastern Limb.
JM was reluctant to be drawn on a platinum production forecast for 2009, arguing there are too many uncertainties in the market.
"On the balance of probabilities, metal output will increase, but only very modestly," Cowley said.
"It remains to be seen how the majors come back from the constraints of this year," she said, pointing out there had been smelter shutdowns, safety stoppages, labour issues and power shortages to contend with in 2008.
"At current metal prices and the rand/dollar exchange rate, there is potential for expansion but not at the rate we'd have expected a year ago," she said.
JM expects three new sources of platinum in 2009. These are Platmin's Pilanesberg opencast mine, Platinum Australia's Smokey Hills mine and Ridge Platinum's Ridge mine.
The Pilanesberg mine is expected to produce 250 000 oz of PGMs a year on average over 11 years, reaching that level within the first year, 2009. Smokey Hills will generate 95 000 oz of PGMs.
Ridge's project will generate 124 500 oz/year of PGMs.
One of the issues that could cause a rethink of projects is the low rhodium price, which has plunged to about $1 200/oz from above $10 000 earlier this year. This would be an issue for companies mining the UG2 reef, which has a higher concentration of the metal than the Merensky reef.
- Miningmx.com
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