NEW YORK, Sept 30 (Reuters) - Platinum supply has been growing faster than rising demand and is therefore projected to shift into a surplus in 2003 that could be as large as 199,000 ounces, precious metals research group CPM Group said Tuesday.
In their 2003 platinum group metals survey, CPM forecast total demand will grow by 4.4 percent to 6,693,000 ounces. Mine supply will increase to 5,482,000, and including secondary supplies and Russian exports, total supply will increase by 9.9 percent to 6,892,000 ounces, resulting in a 2003 surplus of 199,000 ounces.
CPM said industrial demand is expected to rise by 0.2 percent to 6,705,000 ounces in 2004. The group said it also foresees an increase in mine production to 6,150,000 ounces. Adding in secondary supply sources and Russian exports for 2004, the group said it expects total supply could rise by 10.3 percent to 7,600,000, for a net surplus of 895,000 ounces.
The strong increase in platinum demand, despite sharp price gains so far in 2003, suggests demand may continue to be strong in 2004. Platinum prices rose to their second highest levels ever during the third quarter of 2003, with spot platinum hitting a high of $715 an ounce on Sept. 25, up from about $590 at the beginning of the year.
With the world economy expected to expand at a faster pace than it has in two years, CPM said, platinum prices could be supported at relatively high prices and encourage stronger palladium prices as well.
At the same time, CPM Group said it expects supply to grow sharply in both metals, and as mine expansions around the world come into production prices could weaken.
South African platinum production, projected to grow by nearly 500,000 ounces this year, more than accounts for the swing from 2002's deficit to 2003's projected metal surplus.
The report said much of the increased production came from Anglo American Platinum . Technical problems delayed refining of an estimated 200,000 ounces of platinum in the first half of 2003.
"This intra-year shift in supply explains the conflict between strength in platinum prices during the first eight months of 2003 and the expectations of a large surplus for the year," the CPM report said.
Expected strong investment demand in the platinum group metals should offset some of the weakening influences of increased production and sales in South Africa, Russia, Zimbabwe, and other countries.
Palladium demand is showing signs of recovering in 2003 after a sharp decline in 2001 that was less steep in 2002, said CPM.
Total palladium supply is forecast to increase by 10.9 percent to 6,425,000 ounces in 2003, with demand projected to rise 2.9 percent to 4,899,000 for a net surplus of 1,526,000.
In 2004, CPM sees the palladium surplus rising to 1,941,000 ounces with total supply increasing by 9.2 percent to 7,018,000 and demand rising by just 3.6 percent to 5,077,000 ounces.
The report said palladium prices may continue to be volatile, but the extremes of $150 and $1,080 an ounce may not be seen again any time soon.
By late Tuesday, spot palladium was quoted at $209 an ounce.