By Clare Black
LONDON, Jan 24 (Reuters) - Platinum prices eased back from 17-year highs on Friday after the world's third-biggest listed miner Lonmin Plc confirmed a small fall in output, but analysts said a world supply deficit would keep prices firm.
South Africa's Lonmin said it expected to produce at least 840,000 troy ounces of platinum in the year to the end of September, down 30,000 ounces for the year because of an explosion that damaged its Western Platinum smelter last month.
The new output figure is 3.4 percent lower than previous expectations, but is still an 11 percent increase year-on-year.
"I think the market had probably already reacted to it," said Jeremy Coombes, general manager-marketing at UK-based refiners Johnson Matthey.
John Reade, precious metals analyst at UBS Warburg, said Lonmin confirmed in a morning conference call that they would not have to buy or borrow platinum as a result of the accident.
"Production is going to be lower, but not by very much. It was at the lower end of expectations. I think that's not going to have a major impact on the market," Reade said.
17-YEAR PEAKS
Platinum has jumped $50, or just over eight percent since the start of 2003, to its highest level since 1986, amid fund buying on fears of supply disruptions and a soaring gold price.
By 1330 GMT, the spot price was quoted at $647.00/652.00 an ounce, down from New York's last traded $650.50/657.50. The metal peaked on Thursday at $653.70.
In addition to the Lonmin accident, the world's fifth largest producer, Russian giant Norilsk Nickel , is currently trying to avert a strike over pay.
Norilsk and trade unions said they failed to reach agreement on Friday over pay demands but hoped to form a reconciliation committee on Monday to avoid the strike.
Fund buying has driven the rally, which unlike last year's price spikes, came ahead of increased borrowing.
Lease rates continued to tighten on Friday, with one-month rates moving up to 15 percent from 10 percent the previous day.
Higher prices have affected demand from some key consumers.
"We're certainly not seeing as much call for platinum out of the Asian jewellery market at the moment," Coombes said.
However, UBS Warburg precious metals analyst John Reade, said the weaker dollar was to some extent blunting higher platinum prices for Europe-based industrial consumers.
"The price of platinum in euros hasn't gone up very much because of the weakness of the dollar," Reade said.
But although there may be a correction down when the speculative buying dries up, a projected supply deficit would support prices.
"Any supply disruption in this sort of tight environment is having a positive effect, as we've already seen. I think prices are likely to remain around these higher levels," Ingrid Sternby, metals analyst with Barclays Capital said.
World demand for platinum was forecast to grow 2.9 percent to a record 6.37 million ounces in 2002, according to Johnson Matthey's Platinum 2002 Interim Review.
The refiner expected buoyant jewellery demand from China, which accounts for some 44 percent of total demand, would continue to grow in 2003.
Demand from car manufacturers, who use the precious metal in autocatalysts to clean exhaust emissions, was also set to increase, while global supply was expected to see only a marginal rise leaving a projected deficit of some 490,000 ounces for 2002.