Weak Auto Sales Soften Global Platinum Demand, Standard Bank Says

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Researched by Industrial Info Resources (Sugar Land, Texas)--The continuing gloomy outlook for the global economy and anemic industrial demand are de-stabilizing the platinum market, analysts say. "The decreasing auto sales are adding to a drag on platinum demand," said Walter de Wet, head of commodities research at Standard Bank in London.

With increasing pressure from the eurozone crisis, the four biggest automotive markets--the U.S., China, Japan and Europe--are losing steam simultaneously. The latest aggregate sales number for these markets showed that in October, auto sales were up only 1.7% year-over-year, compared to 3.2% year-over-year growth in October 2011 and 4.4% year-over-year growth in October 2010.

"Furthermore, a big drag on the auto sales numbers are European and Japanese auto sales, which registered 8.5% and 5.7% year-over-year declines, respectively, in October," de Wet said. "These two markets are large platinum markets. Also, the jewelry demand will decline in coming days, which will drag platinum prices between $1,600 and $1,700. China's platinum import numbers for September already showed an 8.1% month-over-month drop. Given that platinum has traded above $1,650 for a large part of October, we would expect jewelry demand from China to have remained lackluster."

Also, Barclays analysts are forecasting weak platinum demand in the fourth quarter, as well as the first quarter of 2013. "The bulk demand for platinum to make auto catalysts is still not enough," said Suki Cooper, VP of commodities research at Barclays in London. "This causes the instability in platinum prices. The only supporting figures come from jewellery demand."

In South Africa, gold production fell 11.1% year-over-year in September, and platinum group metals decreased 17.8%. These minerals make up 17.2% and 27% of mining output, respectively. On the New York Mercantile Exchange, platinum futures for January delivery rose 1.4% to $1,583.80 an ounce, which was the biggest increase since October 31.

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