Platnum:
In the London market, platinum prices have hit record highs as concern deepened over output losses in top producer South Africa due to power crisis. In the last one month, there has been significant production loss of the metal in South Africa.
Platinum, used in jewellery and auto catalysts, has risen 25 per cent so far this year, on the top of 37 per cent gains in 2007, after power shortages disrupted mining in South Africa, triggering worries about a bigger market deficit for 2008.
The price of the metal has gone up by 30 per cent; gaining pace after Ango Platinum, the world’s biggest producer said recently the power problem alone would cut output by as much as 120,000 ounces in 2008. It has already cost 30,000 ounces in lost output this year.
Platinum rose to a high of $1965 an ounce in the New York market on February 11. Prices could still climb further as consumers worry about securing supply and producers continue to struggle with production in South Africa. Platinum hit a record high of $2,025 an ounce on February 14 in the New York market. It has gained 32 per cent this year after surging 37 per cent in 2007.
The market nervously awaited financial results of Northam Platinum and Impala Platinum, the world’s second-biggest producer of the metal, for more cues on production losses.
The market is really tight and has been a deficit market for many years and it looks like it has returned to a significant deficit market again.
Mines across South Africa, which accounts for four-fifths of the world’s supply of the metal, ground to a halt for five days at the height of the power crisis last month. Platinum is used in jewellery and auto catalysts to clean exhaust fumes.
Negotiations were under way for South African state-owned power utility Eskom to buy surplus electricity from local producers as part of its bid to solve the nation’s energy crisis.
Analysts say the platinum deficit could widen to more than 400,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006 following seven successive years of deficits.
Impala Platinum, the world’s second biggest platinum producer, said its output in the full year to end-June would decline to just under 2 million ounces, compared to 2.026 million ounces in 2007, due to the power crisis.
Other producers have also lowered forecasts. Anglo Platinum, the world’s top producer, said this week electricity problem alone would cut output by 120,000 ounces in 2008, and had cost 30,000 ounces in lost output since January.
The power crisis in South Africa, which accounts for 80 per cent of global platinum output, continued to affect mining operations. Mines were shut for five days in late January and are now getting only 90 per cent of normal electricity supply.
Unlike gold, the majority of platinum is consumed in industrial applications e.g. auto catalysts, where there is little alternative and so consumers must have the metal almost regardless of price.
Japanese platinum futures also hit a record high, with the most active December 2008 contract ending by the daily 240 yen per gram limit at 6,383 yen.
Platinum’s rally helped other metals, with palladium rising to a six-year high before steadying, silver firming to a 27-year peak and gold rising towards record highs before dipping.
Spot gold rose as high as $924.60 an ounce and was last quoted at $914.90/915.80, against $922.70/923.40 in New York and this month’s record high of $936.50.
In industry news, South African gold output fell 4.1 per cent in December from the previous year, while total output in the full year of 2007 was down 6.5 per cent.
Palladium hit a high of $447 an ounce, its highest level since September 2001, before falling to New York’s level of $437/441. Silver jumped to $17.60 an ounce before falling to $17.38/17.43, against $17.47/17.52 in New York.
Oil
The International Energy Agency expects world oil demand growth to average 1.67 million barrels per day, down 310,000 bpd from its previous estimate. The slowdown in demand is attributable to weaker economic growth, mainly in the developed economies and particularly the United States.
The reduction follows a lower growth forecast from the International Monetary Fund, which last month cut its global 2008 growth projection to 4.1 per cent, a marked slowdown from last year’s 4.9 per cent pace. Economic slowdown in the U.S. — the world’s top oil consumer — will be significant and will last for some time said the IMF.
While oil demand is slowing, risks to supply from Nigeria to Venezuela have helped prices rise to around $93 a barrel from a dip towards $86 last month. The IEA said inventories are low and need to rise. Stocks in member countries of the Organisation for Economic Cooperation and Development fell by 39.5 million barrels in December, although there was some increase in January.
Weak margins prompted oil refiners to reduce crude oil processing in January and February, the most extensive economic run cuts for five years, the IEA said.
World oil supply averaged 87.2 million bpd in January, up 745,000 bpd from December, because of higher supply from Brazil, Azerbaijan, China and Mexico.
Output in January by the 13-member Organisation of the Petroleum Exporting Countries, which decided on February 1 to keep its production target unchanged, was steady at 32 million bpd.
Opec meets next on March 5 and the IEA said any further drop in supply from Nigeria and Iraq — where output fell in January — could again prompt Opec to roll over its supply target.
Cocoa/Coffee:
In the New York market, cocoa prices hit a 24 year peak, while coffee prices were trading close to 10 year highs, suggesting consumers will face higher prices.
ICE May Arabica futures rose 0.5 cents, or 0.3 per cent, to $1.5100 per pound after touching a 10-year high of $1.5120 on February 11.
In London, Liffe May robusta futures rose $6, or 0.3 per cent, at $2,244 per tonne after hitting a 10½-year high of $2,291 a tonne.
Although the supply and demand balance in the global coffee market is viewed as tight, the high levels of speculative and fund involvement are prompting much talk among dealers and analysts as trade houses and industry buyers appear to have been caught out by recent price strength. One dealer said that industry buyers had been expecting a price correction but were being forced to buy on any dips in the absence of more widespread weakness.
In New York, ICE May cocoa futures rose $45 a tonne after touching $2,499, the the highest level since 1984. In London, May cocoa futures rose $13, or 1 per cent, to $1,284 a tonne.
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