Morgan Stanley points to brighter future for platinum

NEW YORK (Aug 28)  The Morgan Stanley Mining and Metals tracker makes gives some interesting analysis of the platinum industry and points to a possible recovery in the price of the precious metal in the next year.

It says Anglo Platinum has concluded its consultation with the unions, which is the final step in the withdrawal of 250,000 ounces of production from its facility in Rustenburg, South Africa.

It points out that on an annual basis this would reduce global supply of mined platinum by 4-6% and brings the market into deficit (assuming a small inflow into exchange traded funds).

The broker notes the market’s reaction has been muted so far. Sizeable above ground stockpiles, the risk of accelerated growth in recycled material and uncertainty around demand from the jewellery and ETF (exchange traded funds) sector may help explain the wariness of investors.

“The first factor is most significant, and under our base case assumptions, it could take up to a year to run above ground inventories down to normal levels and create price tension,” said Morgan Stanley.

“Nevertheless, the process of market re-balancing is underway. As a result the platinum price should recover.”