Platinum facing more record peaks in 2008

LONDON, April 24, 2008 (AFP) - The price of platinum will set more record highs in 2008 on the back of flagging output in South Africa, the independent precious metals consultancy GFMS forecast on Thursday April 22th.

"For 2008, we remain positive ... and are forecasting trading between 1,700 and 2,400 dollars per ounce for platinum," the London-based group said in its annual report on platinum and sister metal palladium.

Platinum, used in the production of expensive jewellery and catalytic converters in vehicles, has blazed a record-breaking trail in recent months.

The white metal hit an all-time pinnacle of 2,301.50 dollars on March 7 after surging by about 40 percent in value last year because of tightening global supplies.

South Africa, which produces about 75 percent of the world's platinum, has faced dwindling output because of accidents, strikes and major power shortages.

Gold and palladium prices have also won strong support from weakening South African production.

"The dominant factor for platinum in 2007 was a sharp decline in global mine production," GFMS said Thursday.

After six years of uninterrupted growth, South African platinum output sank by six percent last year, according to GFMS research.

"This was caused by a renewed zero-tolerance approach to mine-site fatalities, a prevailing shortage of skilled personnel, and industrial action over biennial wage talks and employee safety."

Large parts of South Africa have intermittently been plunged into darkness as state-owned power supplier Eskom imposed blackouts to conserve electricity.

"In 2008, South Africa's miners have been dealt a further blow and are now engulfed by a national energy crisis," GFMS said.

"It began in January, when Eskom declared it was unable to guarantee power supplies, triggering an immediate nationwide stoppage of all underground mining operations, which lasted for five days.

"Although mining resumed as 90 percent of power was restored, there is considerable uncertainty over the effects of this on production levels for 2008."

Looking ahead, the platinum market was not expected to recover this year, despite a predicted fall in jewellery demand due to high prices.

"The chances of a material recovery in 2008 are low, with a greater risk that output may fail to match even last year's disappointing result," GFMS said.

"However, this will not necessarily result in a larger deficit this year as jewellery demand is likely to contract sharply and the scrapping of old jewellery is expected to increase."

Turning to sister metal palladium, GFMS predicted the metal would trade between 400-550 dollars per ounce this year.

Dollar-priced commodities like platinum and palladium have also won support from the weak US currency, which makes them cheaper for foreign buyers. That tends to stimulate demand.

"The investment climate for precious metals remains positive, with portfolio diversification and the pursuit of safe-haven assets being further stimulated by the fall-out from sub-prime and the prevailing weakness of the US dollar," GFMS added.

by Roland Jackson