LONDON, Oct 17 (Reuters) – Investors are unlikely to rush back into platinum any time soon after a minimal price reaction to its biggest-ever supply shock highlighted a major problem: no-one knows how much metal exists above ground or more importantly who holds it.
Analysts predicted a surging market as a record five-month labour stoppage in top producer South Africa wiped out more than one million ounces of output worth $1.28 billion.
Yet platinum, used mostly in automotive catalytic converters which clean up exhaust emissions, also failed to react to a 2.4 million ounce accumulation of metal into exchange-traded funds since 2010. The metal has lost seven percent this year and now sits close to 2009 levels around $1,200 an ounce.
The riddle about the level of inventories holds the key to the price direction of the metal, which is also used in jewellery. As banks start to get uncomfortable about the pace of platinum’s sell-off, they are closing out long positions and reevaluating the global market balance.
“If you start pitching through the historic data, it begins to look like… the demand supply balances in the 2000s weren’t as tight as the data suggests,” Citigroup strategist David Wilson said.
Figures from refiner Johnson Matthey, for years considered a reference measure of supply and demand fundamentals, put the platinum market in deficit for 11 out of 14 years in the period spanning 2000 to 2013. The cumulative shortfall for the whole period was 1.525 million ounces worth around $1.94 billion.
But analysts’ estimates of total above-ground stocks range from four million to 20 million ounces, worth anything between $5 billion and $25 billion, raising the question of how and when that inventory was built up.
Reuters in June revealed that vaults in the Zurich freezone in Switzerland store around 20 percent of the total stocks of platinum held in London and Zurich, the world’s two storage centres for the metal.
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