th November 2010 16 th November 2010 16 www.platinum.matthey.com Good morning everyone, and welcome to Platinum Interim Review 2010. As usual, I’m going to concentrate mainly on what’s been happening in the Pt and Pd markets, then briefly cover developments in the rhodium market. If anyone would like some more detail on Ru or Ir, we’ll be happy to take them in the Q & A session after the presentation. Please note that, as in May, we now report gross demand and recycling figures separately for the electrical and jewellery sectors, in the same way as we do for autocatalyst. Other than that, this presentation will broadly follow the same format as in previous years.
Platinum Platinum www.platinum.matthey.com Starting with platinum…..
Platinum: Key features 2010 Platinum: Key features 2010 • Platinum market in surplus by 290,000 oz in 2010 • Supplies forecast to remain almost flat at 6.01 million ounces, just 15,000 oz lower than in 2009 • Gross demand expected to recover strongly as automotive purchases rise by 37% and industrial purchases increase by 51% • Jewellery demand forecast to soften by 14% while investment demand forecast to reduce by 34% • Recycling of platinum set to increase by 31% supported by higher prices www.platinum.matthey.com The platinum market will be in surplus by 290,000 oz Platinum supplies are expected to remain almost flat as South African and North American production decreases Gross demand will recover strongly, particularly in the automotive and industrial sectors as consumer confidence increases. Jewellery demand will soften as the impact of the higher platinum price is felt. Investment demand will be positive due to strong growth in the US but overall will be lower than in 2009 as profit-taking in the more mature exchange traded funds constrains new demand. Platinum has traded considerably higher so far in 2010 than the previous year, with prices on average 38 per cent higher in the first nine months of this year. This has driven greater levels of recycling, but overall net demand for platinum will increase.
Platinum Supply and Demand Platinum Supply and Demand ‘000 oz 2009 2010 % change Supply 6,025 6,010 (0.2) Gross Demand 6,795 7,560 11.3 Recycling (1,405) (1,840) 31.0 Net Demand 5,390 5,720 6.1 Movement in stocks 635 290 www.platinum.matthey.com Putting this in numerical terms, we forecast a decline in supplies of just 0.2 per cent. Gross demand, however, is expected to increase by over 11 per cent Recovery of platinum from open-loop recycling is expected to increase by 31 per cent Net demand is forecast to rise by 6 per cent to 5.72 million ounces. We anticipate a smaller surplus this year compared with last year’s revised surplus of 635,000 ounces
Platinum Supply down 0.2% Platinum Supply down 0.2% million oz 7 6.025 6.010 • South African supplies to 6 decrease slightly to 4.59 5 million oz 4 • Russian production to grow 3 slightly to 810,000 oz 2 • Supplies from other regions 1 also forecast to grow 0 2009 2010 marginally to 615,000 oz RSA Russia Others www.platinum.matthey.com We forecast that supplies from South Africa will decrease slightly by 50,000 oz to 4.59 million ounces in 2010 due to a series of safety stoppages, strikes, and shaft closures last year, and also high levels of sales from stocks in 2009 which we do not see as being repeated this year. Although there will be higher output from new and recently reopened mines, it won’t compensate for those affected by closures and stoppages. Supplies from current Russian mining operations are expected to grow slightly to 810,000 oz because of increased pgm output from Norilsk Nickel’s operations in its Taimyr and Kola Peninsula operations. Elsewhere, production is expected to be mostly flat. Platinum output from North America is forecast to decrease to 210,000 oz in 2010 mainly due to strike action at Vale’s Sudbury operations. Production from Zimbabwe is expected to rise by 50,000 oz in 2010 as expansions reach full capacity.
Gross Platinum Demand to rise by Gross Platinum Demand to rise by 11.3% 11.3% million oz 7.560 8 • Total demand forecast to increase 6.795 by 765,000 oz to 7.56 million oz 7 6 • Gross autocatalyst demand set to 5 rise by 37% to 2.99 million oz 4 • Industrial demand to soar by 51% 3 to 1.72 million oz 2 • Gross jewellery demand to fall by 1 14% to 2.42 million oz 0 • Physical investment expected to fall 2009 2010 by 34% to 435,000 oz in 2010 Autocatalyst Jewellery Investment Others www.platinum.matthey.com Gross autocatalyst demand for platinum is forecast to recover strongly, rising by 37 per cent to 2.99 million ounces. We expect to see a recovery in sales of diesel cars, particularly in Europe, favouring platinum demand. A recovery in sales of heavy duty diesel vehicles in Europe and North America is also forecast to lift platinum demand, supported by heavy duty diesel legislation in North America. Gross industrial demand is forecast to recover strongly in 2010, raising platinum demand by 51 per cent to 1.72 million ounces on the back of increased sales of electrical and consumer goods. After an impressive year in 2009, gross jewellery demand is expected to fall by 14 per cent in 2010 to 2.42 million ounces as consumers feel the effect of higher platinum prices. We are also unlikely to get a repeat of the stockbuilding that was a feature of 2009. Investment demand is likely to remain strong but lower than in 2009. ETF investment has proved popular in North America but there has been profit taking in the more mature European funds. The Japanese large bar market is set to fall in 2010, and overall investment demand is forecast to be 34 per cent lower than last year at 435,000 oz.
Platinum Demand: Gross Platinum Demand: Gross Autocatalyst Autocatalyst Changes in gross metal million oz 3.5 demand by region 2.985 (2010 vs. 2009) : 3.0 2.185 2.5 2.0 Europe up 46% 1.5 Japan up 35% 1.0 N. America up 16% 0.5 China up 35% 0.0 2009 2010 RoW up 34% Europe Japan North America China Rest of the World www.platinum.matthey.com If we look at gross autocatalyst demand by region, the picture is markedly different to last year, with every region experiencing an increase in gross demand. By the way, we are assuming that there are no strategic purchases of metal by car companies this year. I’ll come to Europe in a minute… Looking at the Japanese automotive sector we forecast demand will rise by 35 per cent to 535,000 ounces, reflecting projected growth in the Japanese vehicle sector to almost 9 million units. Although both car sales and automotive platinum demand are rising in 2010, this is still some way from the demand level seen in 2008. Concerns over the economy still weigh heavily on domestic sales of vehicles, as well as exports. Demand is also expected to recover in North America by 16 per cent to 430,000 ounces on the back of economic recovery and higher sales of heavy duty diesel vehicle which are are now subject to more stringent emissions control legislation. China looks set to remain the biggest car manufacturing country by volume, with output for 2010 predicted at almost 16 million vehicles. Growth in the sector is reflected in platinum demand, which is set to rise by 35 per cent to 115,000 ounces. Finally, the Rest of the World region is expected to see a 34 per cent increase in platinum demand for the automotive sector as output improves. The South Korean automotive industry is expected to fare well in export markets, while the car industries in India and Brazil are expected to continue their high rates of growth.
Platinum Demand: European Platinum Demand: European Autocatalyst Autocatalyst Shift back to diesel vehicle production in Europe, stimulating platinum demand 2009 2010 Diesel 38% Diesel 47% Gasoline 62% Gasoline 53% www.platinum.matthey.com Returning to the increase in platinum demand in the European automotive sector, that 46% increase in forecast demand to 1.4 million ounces is due to two principal factors: increased overall production of vehicles, and also to an increase in the market share of diesel vehicles after a temporary decline in 2009. Our estimate of the share of diesel vehicles in Europe is 47% for 2010, a recovery from 38% last year. Various European government incentive schemes, designed to stimulate new car sales in 2009, had the effect of increasing sales of small, gasoline vehicles while diesel vehicle demand declined proportionally. Poor economic conditions and reduced credit availability in 2009 deferred purchases of fleet vehicles, which are predominantly diesel. A return to more normal car buying habits, as well as increased fleet sales, is expected to boost platinum demand in diesel vehicles in Europe.
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