Source: Marketwatch.com
San Francisco— Platinum prices have more than doubled over the past four years, and that's no surprise given that the white metal is more than 30 times rarer than gold.
Demand for it has kept pace with or outpaced supplies since 1999.
"Platinum is essential and precious," and its use is growing, said R. Michael Jones, president of Platinum Group Metals Ltd., whose Web site touts the metal as "vital to the production of 20% of the world's consumer goods."
Platinum is everywhere — used in numerous applications for the auto, petroleum, and chemistry industries, and it's a highly sought-after metal for jewelry.
Its price reflects its many uses — platinum costs twice as much as gold.
December gold finished at $463 an ounce Thursday, while January platinum futures closed at $925 an ounce — near the record $951 touched Oct. 12.
In keeping with that double value, analysts predict that as gold prices head for $500 an ounce, platinum may set its sights on the $1,000-an-ounce mark. See related story on the prospects for $500 gold.
Both gold and platinum "have some real upside potential in the short and medium term," said Paul Walker, chief executive of precious-metals consultancy GFMS Ltd. in London.
Ultimately, the best metals investment would be gold, in part because it's "still an alternative to paper money," said Peter Grandich, managing member of Grandich Publications, which publishes commentary on the mining and metals markets and other topics.
But "we've seen increased investment demand across the board in metals, and some of it finally spilled over into the platinum-group metals," he said.
A true rarity
Recently, platinum prices have been climbing on the back of "reasonably strong" market supply and demand fundamentals and dollar weakness, said Walker.
In 2004 total world platinum supplies stood at 6.5 million ounces, but demand was 6.58 million, according to data from platinum experts Johnson Matthey.
Compared with 1999, that's a nearly 34% rise in supply, but also an almost 18% climb in demand, Johnson Matthey data showed. See Johnson Matthey's "Platinum 2005" report.
The metal is "35 times rarer than gold and is geologically unlikely to be found in large amounts as a result of the 'freak of nature' process that concentrated it in the Bushveld Complex of South Africa," Jones said.
Indeed, 75% of the world's platinum is mined in South Africa, according to Sean Brodrick, the investment director for the Sovereign Society, a publisher of global investment opportunities.
The rest of the world's platinum is mined in Russia, the United States, Canada and Zimbabwe, according to Johnson Matthey. And, all in all, there are fewer than 10 significant platinum-group-metal-mining companies in the world.
The Bushveld Complex is "the second most exclusive mineral real estate in the world — second only to diamond pipes, and they are spread all over the world," said Jones.
The Vancouver-based Platinum Group Metals Ltd. (CA:PTM: news, chart, profile) announced a joint venture in the western Bushveld region with Anglo American Platinum Corp. Ltd. and Africa Wide Mineral Prospecting and Exploration Ltd. in October 2004.
"We see the next 15 months as very important to us as we drive our first project towards a bankable feasibility and production decision," Jones said in a recent interview.
A full 70% of the world's platinum inventories come from just 220 square miles in the western Bushveld, according to PTM.
With the potential for the Bushveld Complex to become a growth area again, Grandich believes fears of platinum shortages "appear unworthy," he said.
So while demand and supply are nearly matched at the moment, "the equation could tilt towards supply in 2006, thereby putting platinum under some moderate pressure," he said.
Still, there are few places where the concentration of ore grades are economically viable, said James Courage, chief executive of Platinum Guild International, a group funded by leading South African platinum producers and refiners.
And since it takes about 10 tons of raw platinum ore to produce one pure ounce of platinum, "this metal is always prized," said commodities trader Kevin Kerr, who edits the Global Resources Trader, a service of MarketWatch, the publisher of this report.
Demand for the jack of all trades
By far, the bulk of platinum's demand comes from the auto and jewelry industries, with about 40% of consumption originating from the manufacture of auto catalysts and 38% coming from the jewelry sector in 2004, according to a Johnson Matthey report.
Total demand in 2004 reached 6.58 million ounces, up 50,000 ounces from a year before, JM said.
Auto-catalyst consumption rose 7% in 2004 to 3.5 million ounces on the heels of growing European diesel-car production and by tightening emissions
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