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Volatile platinum pricing to continue

July 01, 2009

New York--According to the Platinum Group Metals Yearbook 2009, the volatile price movements of the three major platinum group metals are set to continue, with prices expected to rise over the next few quarters.

Produced by independent research-consulting company CPM Group, the report, released on June 30, indicates that investment demand in the platinum group metals--platinum, palladium and rhodium--is expected to remain healthy, yet supply will remain a concern.

Over the past 18 months, the prices of the platinum group metals have experienced sharp moves in both directions, rising quickly in the first half of 2008 only to collapse later in the year, impacted heavily by the worldwide recession, which adversely affected fabrication demand. At its lowest level in 2008, platinum reached $752.10 per ounce, a figure well below the 2007 low of $1,108.

Platinum prices began to rise during the first half of 2009 and will continue on that trajectory, primarily driven by investment demand, according to the report.

Total platinum supply stood at 7,282,000 ounces during 2008, down 2.2 percent from 2007 levels. The decline in mine production and Russian exports was offset to some extent by the increase in secondary recovery of platinum, which stood at a record high of 1,000,000 ounces in 2008. Mine output, at 5,459,000 ounces, was down nearly 3 percent from 2007 levels, with reduced supply from South Africa and the United States offset by an increase in Canadian mine output.

Many of the problems associated with mining in South Africa, such as power shortages, a shortage of skilled labor and safety-related issues, are expected to remain unsolved during the medium term.

Total platinum fabrication demand for 2008 stood at 6,828,000 ounces, down 3.3 percent from 2007 levels, and jewelry demand in particular was hit by the sharp increase and volatility of the platinum price, according to the report.

The surplus in the platinum market, or total new supply less fabrication demand, stood at 454,000 ounces during 2008, up from 385,000 ounces during 2007.

The average price of palladium in 2008 was $353.77, slightly lower than the 2007 average of $359.21. Total palladium supply declined 4 percent from 2007 levels, and fabrication demand declined as well, by 2.1 percent.

As for rhodium, the price averaged $6,240.21 in 2008, up 3.1 percent from the average price of $6,051 the year before. Supply declined 2.7 percent from 2007 levels, and fabrication demand declined nearly 6 percent during 2008.
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