The ongoing eurozone debt crisis will continue to weigh down international platinum prices over the next year as demand for the white metal remains low, an international commodity analyst has said. Platinum and its sister metal palladium are mostly used in the manufacture of motor vehicle emission control systems and jewellery.
Given the high concentration of the automobile industry in Europe, which has been hard hit by the debt crisis, the metal has this year been trading at all-time low prices of between US$1 375 and US$1 475 an ounce.
As the debt crisis took hold on leading automobile industries in Europe, many closed down while others cut back on operations.
In a recent report, Standard Bank commodity strategist Marc Ground said the demand outlook remained poor and was not likely to improve soon.
“The eurozone is in the doldrums and it is dragging other major economies such as the US and China, down with it. So, in terms of the auto sector, I do not think we can hold out much hope there, over the next year or even over the next two years,” he said.
“I think it is really all now hinging on the eurozone and whether we are going to see an improvement in that and on that front we are not too optimistic. So, I think platinum and palladium prices are going to remain under pressure for at least the next year.”
Ground said prices could start improving by the end of next year, as the world’s two major economies, China and the US, started improving.
But he warned that if the eurozone crisis continued unabated, prices could fall by as much as 30 percent.
“As a worse case scenario, I think if the eurozone gets worse, if we start seeing a break-up of the euro, that is going to put pressure on the euro and then, of course, the dollar is going to strengthen and then prices could tumble quite precipitously.
“We could see prices fall quite significantly from here perhaps up to 30 percent even.”
In 2010, global demand for platinum by the automobile industry stood at 2,985 million ounces, marginally rising to above three million ounces in 2011.
According to Thomson Reuters GFMS, by the end of last year, global platinum surplus stood at 735 000 ounces.
Zimbabwe has the world’s second largest known platinum reserves in the world, after South Africa.
Platinum currently accounts for about 36 percent of the country’s total mineral production, with at least 230 000 tonnes of the white metal having been exported in 2010. — New Ziana.