Pricey PlatinumUPDATE 4-Platinum hits record above $2,100 on supply squeeze
Mon Feb 18, 2008 6:50am EST
By Atul Prakash
LONDON, Feb 18 (Reuters) - Platinum set a record high for the 13th straight session on Monday on lingering power problems in top producer South Africa that have hit mining and widened the gap between demand and supply.
The metal, mainly used in autocatalysts and jewellery, has jumped 22 percent this month, 38 percent so far in 2008 and nearly 75 percent in the past 12 months on supply problems in South Africa, which produces 80 percent of global platinum.
Spot platinum <XPT=> surged nearly 3 percent to a high of $2,107 an ounce and was quoted at $2,095/2,105 at 1138 GMT, against $2,050/2,05 in New York late on Friday.
"The supply tightness is likely to continue. One way to alleviate that is by giving the miners sufficient energy so that they could produce, but that doesn't seem to be happening," said Michael Widmer, metals analyst at Lehman Brothers.
"The price rises will likely not be subsiding. The limit is really when enough demand has been destroyed and enough new supply has been coming online so that the market is balanced. And that's going to take time," he said, adding prices could easily rise to $2,500 in six months.
Mines across South Africa have been hit by a lack of power after state utility Eskom [ESCJ.UL] asked the mining sector to cut power use to 90 percent of normal needs to ease a nationwide shortage caused by the failure of electricity generation to match economic growth.
Analysts said the global platinum deficit could widen to 400,000 to 500,000 ounces by the end of 2008, from about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006 following seven successive years of deficit.
"The pressure valve is fully open and the market is still moving higher and that's quite a big concern," Ross Norman, managing director of TheBullionDesk.com, said.
"What this does underscore is just how thin this market is and that any kind of disruption can send it spiralling out of control. Unlike most metals, there's little way of sorting this out sensibly as there's no way of accelerating production.
"I can almost see this market going up to $3,000 per ounce quite conceivably this year with what we've got going on at the moment," Norman said.
Japanese platinum futures were also at record highs. The most active December contract <0#JPL:> on the Tokyo Commodity Exchange rallied by the daily 240 yen limit to a record high of 6,945 yen per gram before ending at 6,900 yen, up 195 yen.
The Tokyo exchange imposed an additional margin of 60,000 yen per contract to all new positions built for platinum futures contracts from Monday on top of the initial margins in an effort to cool the market
In other precious metals, palladium jumped to a six-year high of $466.20 an ounce, tracking platinum's rally. But gold and silver eased.
Spot palladium <XPD=> was last quoted at $453/457 an ounce, up from $444/449 in the U.S. market, while silver <XAG=> edged down to $17.00/17.05 an ounce from $17.11/17.16.
Gold <XAU=> rose to a high of $909.25 an ounce before falling to $902.00/903.10 an ounce, against $903.00/903.80 in New York. U.S. April gold futures GCJ8 fell $1.2 an ounce to $904.90 an ounce.