Why Nickel and Platinum

The fundamentals of the Platinum market are excellent with the automotive and jewellery sectors remaining pillars of the market. Automotive usage will continue to grow due to the adoption of stricter emission standards worldwide and increasing diesel vehicle sales. China is forecast to remain the cornerstone of the jewellery sector, which will also be bolstered by a return of economic growth worldwide and development of new markets. Platinum prices have risen by more than a third in 2003 as demand for the metal remains robust while concerns grow for future production. Demand for platinum has been particularly strong from the auto sector for catalytic converters, which are used in exhaust systems for cars.

December 2003 - platinum hit a 23-year high of US$818 per ounce.

Nickel has been outperforming all other metals recently and is well placed in the long term to continue its improved position. Nickel prices have increased 125% since November 2001. The mid-September 2003 price of US$9,800/t (446c/lb) is 45% up on the 2002 average.

December 2003 - nickel at its highest level for 14 years.

Stainless steel is by far the dominant use of nickel, accounting for as much as 70% of western world demand. China will have an increasing need for all metals as its economy continues its seismic shift from centrally organised and largely rural to free-enterprise and industrial. Growth in demand for stainless steel, which is a useful indicator of the metals sector in general, normally accompanies industrial growth.

A comparison with other east Asian economies that have grown since the second world war may give an indication of the future of Chinese demand. In 1960 Japanese steel production accounted for 10% of world sales. By 1974 this share had increased to more than 33%. One half of the growth in world stainless steel production between 1960 and 1970 was in Japan. Korea and Taiwan together accounted for 50% of growth in the world’s stainless steel production between 1995 and 2000. In 1970 Japanese per capita demand for stainless steel was 9Kg. In 1995 Korea per capita demand was 17Kg and Taiwan 33Kg. Growth in stainless steel demand in China now appears to be following the same path as these other east Asian countries.

The increase in Chinese stainless steel demand in 2002 was equal to one half of total U.S. production. If China reaches the same per capita level of stainless steel demand as Japan had in 1970 the total demand for China will be 60% of current world demand.

Future trends in the metal market show a gap opening between supply and demand caused by increasing Chinese demand and to a lesser extent higher demand from India and other industrial economies.

As a consequence there will be an increase in global metal exploration in coming years to find new ore to satisfy this demand.

Geologically nickel and platinum often occur together as well as in association with gold and copper, two other well performing metals.




Source: “The State of the Industry”, The Raw Materials Group, 2003

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