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Platinum sets lifetime high on S.Africa output woes

The rally, which has sent prices up 30 percent in three weeks, gained pace after Anglo Platinum, the world’s biggest producer, said on Monday the power problem alone would cut output by as much as 120,000 ounces in 2008. It had already cost 30,000 ounces in lost output this year.

Platinum rose to a high of $1,965 an ounce before falling to $1,948/1,956 by 1120 GMT, against $1,933/1,941 in New York late on Monday.

The market nervously awaited financial results of Northam Platinum on Tuesday and Impala Platinum, the world’s second-biggest producer of the metal, on Thursday for more cues on production losses.

‘It’s a chronic problem. It has been a deficit market for many years and it looks like it has returned to a significant deficit market again,’ said David Holmes, director of metals sales at Dresdner Kleinwort Investment Bank.

‘The market is really tight. The only way that the shortfall can be made up is by a decline in industrial or jewellery demand,’ he said, but added: ‘Jewellery demand is considered the more price sensitive of the two.’

Mines across South Africa, which accounts for four-fifths of the world’s supply of the metal, ground to a halt for five days at the height of the power crisis last month. Platinum is used in jewellery and auto catalysts to clean exhaust fumes.

Negotiations were under way for South African state-owned power utility Eskom to buy surplus electricity from local producers as part of its bid to solve the nation’s energy crisis, Public Enterprises Minister Alec Erwin said on Monday.

Widening market deficit

Analysts say the platinum deficit could widen to more than 400,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006 following seven successive years of deficits.

‘Prices could still climb further as consumers worry about securing supply and producers continue to struggle with production in South Africa,’ Fairfax investment bank said.

‘Unlike gold, the majority of platinum is consumed in industrial applications e.g. auto catalysts, where there is little alternative and so consumers must have the metal almost regardless of price,’ it said in a client note.

Japanese platinum futures also hit a record high, with the most active December 2008 contract ending by the daily 240 yen per gram limit at 6,383 yen.

‘We maintain that there is upside to the metal, and recommend going long platinum,’ Standard Bank said.

Platinum’s rally helped other metals, with palladium jumping to a six-year high, silver hitting a 27-year peak and gold hovering within sight of an all-time high.

Spot gold rose as high as $924.60 an ounce and was last quoted at $921.40/922.30, against $922.70/923.40 in New York and this month’s record high of $936.50.

In industry news, South African gold output fell 4.1 percent in December from the previous year, while total output in the full year of 2007 was down 6.5 percent.

Palladium hit a high of $447 an ounce, its highest level since September 2001, before falling to $437/441, versus $437/440 in New York. Silver jumped to $17.60 an ounce and was later quoted at $17.49/17.54, against $17.47/17.52.