platinum 2009
`
`platinum 2009
`
`Precious Metals Marketing, Orchard Road, Royston, Hertfordshire, SG8 5HE, England
`Telephone: +44 (0)1763 256315 Fax: +44 (0)1763 256339
`www.platinum.matthey.com
`
`BASF-2038.001
`
`

`
`acknOwlEdGEMEnTS
`
`Johnson Matthey gratefully acknowledges the contribution of many individuals and companies within the platinum industry in providing
`information for the compilation of Platinum 2009.
`
`In particular, our thanks go to Denise Garwood, Alison Cowley, and the members of the Johnson Matthey precious metals market research
`team and to Tanaka Kikinzoku Kogyo KK for their invaluable assistance in Japan.
`
`Platinum 2009 is based for the most part on information available up to the end of March 2009.
`
`Platinum 2009 is the copyright of Johnson Matthey. Material from this publication may be reproduced without prior permission provided that
`“Platinum 2009” and Johnson Matthey are acknowledged as the source.
`
`© Published in May 2009 by Johnson Matthey.
`
`Johnson Matthey Public Limited Company.
`Precious Metals Marketing, Orchard Road, Royston, Hertfordshire, SG8 5HE, England.
`Tel: +44 (0)1763 256315
`E-mail: ptbook@matthey.com
`
`Design: Wonderberry UK Ltd.
`
`Print: Fulmar Colour Printing Co. Ltd.
`
`PEFC/16-44-002
`
`Printed in the United Kingdom.
`
`ISSN 0268-7305
`
`Flotation processing of milled ore is
`an important step in the production of
`platinum group metals in South Africa.
`
`GlOSSaRy
`
`BEE
`CIS
`CO
`CSF
`DMFC
`DOC
`DPF
`ETF
`ETN
`g
`HC
`HDD
`HIC
`jv
`kg
`LCD
`Merensky
`MLCC
`NOx
`NYMEX
`oz
`PDP
`PEMFC
`PET
`pgm
`
`
`Black Economic Empowerment
`Commonwealth of Independent States
`Carbon Monoxide
`Catalysed Soot Filter
`Direct Methanol Fuel Cell
`Diesel Oxidation Catalyst
`Diesel Particulate Filter
`Exchange Traded Fund
`Exchange Traded Note
`Gram
`HydroCarbons
`Heavy Duty Diesel
`Hybrid Integrated Circuit
`Joint Venture
`Kilograms
`Liquid Crystal Display
`A platiniferous ore body in South Africa
`Multi-Layer Ceramic Capacitor
`Oxides of nitrogen
`New York Mercantile Exchange
`Ounces troy
`Plasma Display Panels
`Proton Exchange Membrane Fuel Cell
`PolyEthylene Terephthalate
`Platinum Group Metal(s)
`
`Platreef
`PM
`PMR
`ppm
`ppt
`PTA
`SCR
`SUV
`TOCOM
`ton
`tonne
`TWC
`UG2
`ULEV
`VAM
`
`A platiniferous ore body in South Africa
`Particulate Matter
`Perpendicular Magnetic Recording
`Parts Per Million
`Parts Per Thousand
`Purified Terephthalic Acid
`Selective Catalytic Reduction
`Sports Utility Vehicle
`Tokyo Commodity Exchange
`Short ton (2,000 pounds or 907 kg)
`1,000 kg
`Three-Way Catalyst
`A platiniferous ore body in South Africa
`Ultra Low Emissions Vehicle
`Vinyl Acetate Monomer
`
`NOTE ON PRICES
`All prices are quoted per oz unless otherwise stated.
`R
`South African Rand
`£
`UK Pound
`$
`US Dollar
`¥
`Japanese Yen
`€
`Euro
`RMB
`Chinese Renminbi
`
`PicTuRE cREdiTS
`
`Johnson Matthey is grateful to the following for their help in providing illustrations for Platinum 2009:
`
`Headgear at Lonmin’s Hossy shaft, front cover and p15
`Platinum bars, front cover, p2 and p28
`Petroleum reforming plant, front cover, p2 and p29
`Biliary platinum stent, front cover, p2 and p30
`Parting basket for assaying, front cover, p3 and p11
`Flotation processing at Impala lease area, inside cover
`Mototolo mine, p2 and p18
`Melting of scrap jewellery in China, p2 and p25
`Unsold cars, p2 and p33
`Autocatalyst recycling, p2 and p34
`Palladium ingots, p3
`Iridium drain for glass manufacture, p3 and p12
`Komsomolsky mine in Norilsk, p3 and p20
`Uncoated diesel filters, p3 and p31
`Palladium jewellery purchase, p3 and p35
`Multi-layer ceramic capacitors, p3 and p37
`Ore belt at Impala lease area, p16
`Underground mining machinery, p17
`Processing plant at Smokey Hills, p19
`Employee at Mimosa flotation plant, p22
`Chinese jewellery manufacture, p26
`
`Lonmin Plc.
`Tanaka Kikinzoku Kogyo K.K.
`UOP LLC, A Honeywell Company
`Boston Scientific Corporation
`Stewart Group
`David Jollie/Johnson Matthey
`Xstrata
`David Jollie/Johnson Matthey
`Joerg Reimann/iStockphoto
`David Jollie/Johnson Matthey
`David Jollie/Johnson Matthey
`Christophe Couderc/Johnson Matthey
`Norilsk Nickel
`Ibiden Co. Ltd.
`David Jollie/Johnson Matthey
`EPCOS UK Ltd.
`David Jollie/Johnson Matthey
`Lonmin Plc.
`Platinum Australia Limited
`Aquarius Platinum
`David Jollie/Johnson Matthey
`
`BASF-2038.002
`
`

`
`platinum 2009
`
`by David Jollie
`
`Executive Summary .............................................................................2
`
`Platinum Summary ..............................................................................4
`
`Palladium Summary ...........................................................................6
`
`Other PGM Summary .........................................................................8
`
`Outlook .........................................................................................................10
`
`Supplies, Mining and Exploration ........................................14
`
`Platinum .....................................................................................................23
`
`Palladium ...................................................................................................31
`
`Other Platinum Group Metals .................................................42
`
`Prices and Futures Markets ......................................................44
`
`Special Feature
`
`Palladium Use in Diesel Oxidation Catalysts ............39
`
`Supply and Demand Tables
`
`Platinum Supply and Demand................................................52
`
`Platinum Demand by Application: Regions ................53
`
`Palladium Supply and Demand .............................................54
`
`Palladium Demand by Application: Regions ..............55
`
`Rhodium Supply and Demand ................................................56
`
`Glossary ...............................................................inside back cover
`
`BASF-2038.003
`
`

`
`ExEcutivE Summary
`
`The platinum market was in deficit by 375,000 oz in 2008. Global platinum supplies fell heavily to
`5.97 million ounces. Net demand for platinum decreased by 5.0 per cent to 6.35 million ounces, as a number
`of sectors were affected by the economic slowdown. Supply disruptions drove the price to a record $2,276
`in March 2008 before investor sales forced it sharply down later in the year, to a low of $756 in October.
`
`
`
`
`
`
`
`
`
`
`
`
`
`Global supplies of platinum declined by 9.5 per cent in 2008 to 5.97 million ounces. Sales of platinum
`from South Africa decreased to 4.53 million ounces, driven lower by a combination of bad weather, geological
`issues, safety closures, smelter problems and a shortage of skilled staff. Russian platinum supplies fell to
`820,000 oz, while sales of metal from other producing nations were marginally up at 295,000 oz .
`
`
`
`Gross autocatalyst demand for platinum fell
`by 8.2 per cent to 3.81 million ounces in 2008.
`European auto makers purchased less platinum for
`use in catalytic converters than they bought in 2007
`due to lower light duty vehicle production, despite
`
`the greater use of platinum-containing diesel
`particulate filters. Platinum use in other regions
`fell, reflecting lower vehicle output and continuing
`efforts to replace any remaining platinum in
`gasoline catalyst formulations with palladium.
`
`Jewellery demand, net of recycling, declined by 6.2 per cent to 1.37 million ounces in 2008.
`Manufacturing volumes and retail sales were depressed by the high metal prices in the first half of the
`year in every region, but recovered later in China and Japan once the platinum price declined. Recycling
`volumes were very large in Asia earlier in the year but decreased sharply in response to the price change.
`
`Net physical investment demand for platinum grew strongly, from 170,000 oz in 2007 to 425,000 oz
`in 2008. Purchasing of metal through the Exchange Traded Funds was volatile, with heavy buying in early
`2008 and heavy selling later in the year. The fall in the platinum price in the final months of the year was met
`by very strong buying interest from Japanese investors, which accounted for the year-on-year increase.
`
`Demand for platinum for industrial applications
`fell by 4.9 per cent to 1.76 million ounces in 2008.
`Purchases of metal fell in the chemical and
`electrical sectors as the global economy slowed in
`
`the second half of the year but more metal was
`purchased by the petroleum refining industry.
`Glass sector demand fell due to the closure of a
`number of conventional television glass factories.
`
`The rhodium market moved from a deficit of 20,000 oz in 2007 to a surplus of 6,000 oz in 2008. Global
`supplies fell by 15.7 per cent to 695,000 oz as production problems in South Africa hit rhodium output. Net
`rhodium demand fell by 18.4 per cent to 689,000 oz as autocatalyst demand dropped due to lower vehicle
`production. While the price reached a record $10,100 in June, it ended the year at a much weaker $1,250.
`
`page 2
`
`Platinum 2009
`
`BASF-2038.004
`
`

`
`EXECUTIVE SUmmary
`
`The palladium market was in surplus by 460,000 oz in 2008. Net palladium demand climbed by 15,000 oz
`to 6.85 million ounces despite the economic slowdown. Palladium supplies fell to 7.31 million ounces due to
`lower production in Russia, South Africa and North America and lower sales of Russian state stocks than in
`2007. The palladium price followed platinum, reaching a peak of $588 before ending the year at $183.50.
`
`Supplies of palladium decreased to 7.31 million ounces in 2008, a fall of 14.8 per cent. South African
`sales of palladium fell by 335,000 oz to 2.43 million ounces due to the wide range of problems experienced
`by its mining industry. North American supplies of palladium decreased as production was cut in the final
`quarter of the year. Total Russian supplies declined to 3.66 million ounces: primary production fell and sales
`of palladium from state stocks were over half a million ounces lower than in the previous year.
`
`Gross autocatalyst palladium demand decreased
`by 3.6 per cent in 2008 to 4.38 million ounces.
`Palladium demand in North America fell heavily as
`automotive sales were hit by economic conditions.
`
`In Europe, palladium use rose as more of this metal
`was employed in the diesel sector. Rising vehicle
`output in China and the Rest of the World region
`also gave some support to palladium demand.
`
`Net demand for palladium from the jewellery industry climbed by 19.6 per cent to 855,000 oz in 2008.
`Palladium demand in Europe and North America grew to a combined 105,000 oz. In China, demand rose
`from 500,000 oz in 2007 to 650,000 oz in 2008 as the flow of recycled old jewellery stock decreased and
`manufacturing volumes of palladium jewellery were strong in the first three quarters of the year.
`
`Physical investment demand for palladium climbed by over 50 per cent to 400,000 oz in 2008. Net
`purchases through Exchange Traded Funds rose to 370,000 oz as investors were steady buyers of palladium
`for most of the year. Demand for the production of coins and small bars climbed to 30,000 oz.
`
`Industrial demand for palladium climbed by
`2.4 per cent to 2.39 million ounces in 2008. Net
`purchases of palladium by the electronics sector
`grew again, to 1.33 million ounces, as the number of
`
`palladium-containing multi-layer ceramic capacitors
`manufactured rose. Dental sector use of palladium
`was flat at 630,000 oz while demand for palladium
`from the chemical industry fell to 350,000 oz.
`
`Ruthenium demand fell for a second successive year, to 669,000 oz in 2008. The electronics industry
`purchased substantially less metal for the production of perpendicular magnetic recording hard disks as
`manufacturers continued to reduce their working stocks of ruthenium. Iridium demand fell by 2,000 oz to
`102,000 oz due to a decline in demand for crucibles for crystal growing.
`
`Platinum 2009
`
`page 3
`
`BASF-2038.005
`
`

`
`Platinum Monthly Prices 2006-2008 (US$ per oz)
`High Low Average
`
`2,500
`
`2,000
`
`1,500
`
`1,000
`
`500
`
`0
`
`2006
`
`2007
`
`London am & pm fixings
`
`2008
`
`2008 was a
`year of highs
`and lows for the
`platinum price
`with fundamentals
`and investor
`activity both
`having a profound
`influence.
`
`2008
`
`PLATINUM
`Palladium Monthly Prices 2006-2008 (US$ per oz)
`High Low Average
`Net global demand for platinum fell by 5.0 per cent
`to 6.35 million ounces in 2008. Gross autocatalyst
`demand was depressed by the slowing world
`economy and fell heavily to 3.81 million ounces.
`Industrial demand weakened rapidly towards the
`end of the year and fell to 1.76 million ounces.
`Annual physical investment demand rose by
`150 per cent to 425,000 oz. Net jewellery demand
`fell to 1.37 million ounces, a fall of 6.2 per cent, a
`much smaller decrease than previously expected.
`A series of challenges – from electricity supply
`2007
`2008
`to safety shutdowns, and from skills shortages to
`London am & pm fixings
`bad weather – depressed South African platinum
`supplies by 10.7 per cent in 2008 to 4.53 million
`ounces. With Russian platinum production also
`falling, total platinum supplies decreased by 9.5 per cent to 5.97 million ounces. With demand exceeding
`supply – despite a slowing global economy – the platinum market was in a deficit of 375,000 oz in 2008.
`Demand for platinum fluctuated during 2008 in response to the volatile platinum price and the weakening
`economy. As a result, we have made significant revisions to our previous estimates for demand in the autocatalyst
`Rhodium Monthly Prices 2006-2008 (US$ per oz)
`Iridium Monthly Prices 2006-2008 (US$ per oz)
`sector – where working stocks of catalysts were run down further than initially forecast – and in the jewellery and
`High Low Average
`High Low Average
`12,000
`investment sectors – where the falling platinum price prompted extremely strong demand in late 2008 in Asia.
`The weakness in the automotive industry was widely reported in the media during 2008 but intensified only
`10,000
`later in the year. Falling output was seen earliest in North America where annual light duty vehicle production
`8,000
`dropped by nearly twenty per cent. The economic slowdown was seen later in Europe where light duty vehicle
`output fell by only six per cent. There was support for automotive platinum demand from tightening emissions
`6,000
`legislation in Europe, which encouraged greater use of platinum-rich diesel particulate filters
`4,000
`on passenger cars, and from rising vehicle production in China. Overall, gross autocatalyst
`platinum demand fell by 8.2 per cent in 2008 to 3.81 million ounces.
`2,000
`The weight of platinum recovered from spent catalytic converters climbed to 1.01 million
`0
`ounces in 2008. This growth was driven partly by an increase in average metal loadings of
`2008
`2006
`2007
`the catalysts being collected and partly by the high metal prices in the first half of the year
`915
`820
`Johnson Matthey Base Prices
`Johnson Matthey Base Prices
`which encouraged the recycling industry to process stocks it had previously hoarded.
`325
`325
`Net platinum demand from the jewellery industry fell by 6.2 per cent to 1.37 million ounces
`in 2008. In the first six months of the year, record prices weakened consumer purchasing
`in every market and prompted increased recycling of old jewellery in Asia. However, as the
`price fell, retailers and manufacturers in China in particular took the opportunity to rebuild
`their stocks of platinum jewellery. Many retailers also reduced store prices, stimulating
`higher consumer sales. The softening price caused recycling volumes to diminish rapidly
`Ruthenium Monthly Prices 2006-2008 (US$ per oz)
`in China and in Japan. Net platinum demand was therefore particularly strong in the final
`High Low Average
`quarter of the year and in early 2009. However, demand remained weak in Europe and
`North America where low consumer confidence limited sales of all precious jewellery.
`Industrial demand for platinum fell from 1.85 million ounces to 1.76 million ounces in 2008
`and was especially soft in the final quarter of the year. Demand decreased in the chemical
`sector as production was cut in response to weak consumer demand in late 2008. As a result,
`while some new plant capacity was installed during the year, platinum demand steadily
`
`Summary
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`Supply
`
`2006
`
`Platinum Supply and Demand
`’000 oz
`
`2007
`
`2008
`
`South Africa
`2006
`
`5,070
`
`4,530
`2007
`
`Russia
`
`Others
`
`North America
`
`Total Supply
`
`Demand
`
`290
`
`295
`
`6,600
`
`5,970
`
`Autocatalyst: gross
`
` recovery
`
`4,145
`
`3,805
`
`(935)
`
`(1,005)
`
`Jewellery
`Industrial1
`
`Investment
`
`Total Demand
`
`1,455
`
`1,845
`
`170
`
`6,680
`
`1,365
`
`1,755
`1,000
`
`425
`800
`6,345
`
`Movements in Stocks
`
`(80)
`
`(375)
`600
`
`1 Industrial includes chemical, electrical,
`glass, petroleum refining and other
`industrial demand.
`
`400
`
`200
`
`0
`
`2006
`
`2007
`
`2008
`
`Johnson Matthey Base Prices
`
`page 4
`
`Platinum 2009
`
`BASF-2038.006
`
`

`
`
`
`Summary
`
`Demand for Platinum 2004-2008
`Demand for Platinum 2004-2008
`million oz
`million oz
`
`Platinum Supply by Region 2004-2008
`Platinum Supply by Region 2004-2008
`million oz
`million oz
`
`weakened and fell to 395,000 oz. In the glass sector, there was good demand for platinum from the construction
`of factories producing fibre glass and LCD television glass in Asia. However, net platinum demand was reduced
`to 390,000 oz by the sale back to the market of metal from a number of Chinese cathode ray tube (CRT) glass
`factories which closed during the year. Net demand in the electronics sector was driven lower, to 225,000 oz,
`by a decrease in the hard disk industry’s working stocks, despite an increase in the amount of platinum actually
`coated onto hard disks. Meanwhile, the petroleum refining sector purchased 245,000 oz of platinum, 40,000 oz
`more than one year earlier. Other applications took 500,000 oz of platinum in 2008.
`Annual net physical investment demand rose by 150 per cent to 425,000 oz. Buying through the European
`Exchange Traded Funds (ETFs) was very strong in early 2008. However, as commodity and equity prices plunged
`in the second half of the year, investors sold much of this metal. The behaviour of individual Japanese investors
`was quite different. They sold more metal than they bought in the first few months of 2008 but purchased
`extremely large quantities of platinum bars in the final quarter in response to the fall in the metal price.
`Global platinum supplies dropped from 6.60 million ounces in 2007 to 5.97 million ounces in 2008. Production
`fell steeply in South Africa and also decreased in Russia. Supplies of platinum from North America were unchanged
`from 2007. Sales of metal from Zimbabwe and other minor producing nations were almost flat at 295,000 oz as
`the Zimbabwean producers maintained production levels in a difficult political and economic environment.
`South African supplies of platinum were disappointing in 2008, falling 540,000 oz to only 4.53 million ounces.
`The three largest mining houses – Anglo Platinum, Impala and Lonmin – all recorded lower output than in 2007
`with bad weather, safety shutdowns, industrial unrest and skills shortages amongst the numerous causes. An
`intermittent electricity supply had initially been expected to have a substantial impact across the country but direct
`losses were limited to roughly 60,000 oz of platinum production. There were, though, improved performances at
`some of the smaller mines: Modikwa, Northam, Two Rivers and Crocodile River all reported modest increases in
`production of pgm in concentrate.
`Russian platinum supplies also decreased in 2008, primarily due to lower output from Norilsk Nickel where
`platinum sales fell from 727,000 oz to 632,000 oz. North American platinum supplies were flat at 325,000 oz. There
`were lower sales from Stillwater and North American Palladium but a rise in platinum production as a by-product
`from the Canadian nickel mines. Zimbabwean platinum production increased despite a very difficult political and
`operating environment. Supplies from Zimbabwe and other producing countries rose by 5,000 oz to 295,000 oz.
`The volatility in the platinum price during 2008 was without precedent. The first fix of the year was at $1,530,
`just a few dollars below the previous record price of $1,544 recorded in December 2007. Disruption to platinum
`supplies from South Africa combined with a
`weak US Dollar to drive platinum to a record
`$2,276 on the 4th of March. The price remained
`high until the middle of the year when escalating
`concerns over the global economic situation
`prompted many funds to liquidate large positions
`in commodity and equity investments. While
`fundamentals did play a part in price movements,
`fund investment activity was more important. The
`purchasing of metal over recent years had helped
`drive the price to record levels but much of this
`metal – in the form of forward purchases, futures
`positions and physical metal – was sold in the
`second half of 2008. With several million ounces
`of long positions having been liquidated, the
`platinum price crashed to $756 in October before
`recovering to end the year at $899.
`
`Jewellery
`Jewellery
`
`Industrial
`Industrial
`
`Investment
`Investment
`
`South Africa
`South Africa
`
`Russia
`Russia
`
`North America
`North America
`
`Others
`Others
`
`7 6 5 4 3 2 1 0
`7 6 5 4 3 2 1 0
`
`Autocatalyst
`Autocatalyst
`(net)
`(net)
`
`7 6 5 4 3 2 1 0
`7 6 5 4 3 2 1 0
`
`2004 2005 2006 2007 2008
`2004 2005 2006 2007 2008
`
`2004 2005 2006 2007 2008
`2004 2005 2006 2007 2008
`
`Platinum 2009
`
`page 5
`
`BASF-2038.007
`
`

`
`Summary
`
`PALLADIUM
`
`Palladium Supply and Demand
`’000 oz
`
`Supply
`
`South Africa
`Russia
`
` Primary Production
`
` State Sales
`
`North America
`
`Others
`
`Total Supply
`
`Demand
`
`Autocatalyst: gross
`
` recovery
`
`Jewellery
`
`Electronics
`Other1
`
`Total Demand
`
`Movements in Stocks
`
`2007
`
`2008
`
`2,765
`
`2,430
`
`
`
`3,050
`
`1,490
`
`990
`
`285
`
`
`
`2,700
`
`960
`
`910
`
`310
`
`8,580
`
`7,310
`
`4,545
`
`4,380
`
`(1,015)
`
`(1,170)
`
`715
`
`1,240
`
`1,350
`
`6,835
`
`1,745
`
`855
`
`1,325
`
`1,460
`
`6,850
`
`460
`
`1 Other includes physical investment,
`dental, chemical and other industrial demand.
`
`
`page 6
`
`increased by
`Net global palladium demand
`15,000 oz to 6.85 million ounces in 2008, despite
`the worsening economic climate. Falling vehicle
`production in North America cut demand there by
`350,000 oz but gross global autocatalyst demand
`fell by only 165,000 oz to 4.38 million ounces due
`to a strong performance in other regions. Demand
`from the electronics sector rose to 1.33 million
`ounces. Dental usage of palladium remained
`steady at 630,000 oz. Palladium offtake for jewellery
`manufacturing improved, with lower recycling of
`old stock in China helping drive net global demand
`higher to 855,000 oz. Demand in the physical
`investment market strengthened to 400,000 oz.
`Global palladium supplies decreased by 14.8 per cent to 7.31 million ounces during 2008. The problems
`that depressed platinum production in South Africa also hit palladium output, which fell to 2.43 million
`ounces. In North America, mine production was cut in late 2008 and supplies dropped to 910,000 oz. Sales
`of palladium from Russian primary production fell by 350,000 oz to 2.70 million ounces. We estimate that
`sales of palladium from Russian state stocks decreased too, from 1.49 million ounces in 2007 to 960,000 oz
`Iridium Monthly Prices 2006-2008 (US$ per oz)
`High Low Average
`in 2008. As a result of these sales, the palladium market was in oversupply, by 460,000 oz, during 2008.
`500
`In the autocatalyst sector, gross palladium demand fell by 3.6 per cent in 2008 to 4.38 million ounces. Although
`North America remains the largest market in terms of palladium consumption, purchases of metal in this region
`400
`decreased by 350,000 oz – more than twenty per cent – to 1.35 million ounces in 2008. Light duty vehicle production
`fell throughout the year as the economy weakened. A lack of consumer confidence and
`300
`high oil prices hit sales of larger vehicles especially, further depressing palladium demand.
`200
`In Europe, light duty vehicle production fell and the amount of palladium used on
`gasoline vehicles decreased as a direct result. However, increasing use of platinum/
`100
`palladium catalysts in the diesel sector in place of platinum-only formulations drove total
`palladium demand 30,000 oz higher in this region to 950,000 oz. Gross autocatalyst demand
`0
`for palladium climbed in China, Japan and the Rest of the World region too.
`2006
`2007
`The weight of palladium recovered from spent autocatalysts increased to 1.17 million
`Johnson Matthey Base Prices
`ounces in 2008. The percentage of end-of-life vehicles from which the catalyst is recovered
`is rising in every region. Average palladium loadings of these spent autocatalysts are also
`increasing, leading to long-term growth in recovery of palladium from this source. In 2008,
`recycling volumes were particularly strong as high metal prices encouraged the processing
`of catalysts which had previously been hoarded. Recovery rates, however, decreased at the
`end of the year as prices fell, and remained depressed in early 2009.
`Net demand for palladium for use in jewellery manufacturing climbed by 19.6 per cent
`to 855,000 oz in 2008. Net Chinese demand for palladium increased strongly to 650,000 oz.
`1,000
`Lower amounts of old Pd950 stock (95 per cent purity alloy) were recycled than had
`been the case in 2007 and little of this stock now remains. Additionally, a number of
`800
`manufacturers switched some of their jewellery production into palladium in the first half
`of 2008 in response to high platinum and gold prices. This switching was reversed later in
`600
`the year as the platinum price fell, lending some uncertainty to the prospects for jewellery
`industry demand for palladium in China in 2009. In Europe and North America, palladium
`400
`
`Palladium Monthly Prices 2006-2008 (US$ per oz)
`High Low Average
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`2006
`
`2007
`
`London am & pm fixings
`
`2,500
`
`2,000
`
`1,500
`
`1,000
`
`500
`
`0
`
`12,000
`
`10,000
`
`8,000
`
`6,000
`
`4,000
`
`2,000
`
`0
`
`2008
`
`The palladium
`price reached a
`multi-year high of
`$588 in March
`but slumped back
`to end the year
`below $200.
`
`2008
`
`Ruthenium Monthly Prices 2006-2008 (US$ per oz)
`High Low Average
`
`200
`
`0
`
`Platinum 2009
`
`2006
`
`2007
`
`Johnson Matthey Base Prices
`
`BASF-2038.008
`
`

`
`
`
`Summary
`
`Demand for Palladium 2004-2008
`Demand for Palladium 2004-2008
`million oz
`million oz
`
`Palladium Supply by Region 2004-2008
`Palladium Supply by Region 2004-2008
`million oz
`million oz
`
`continued its steady development into a mainstream jewellery metal and demand rose in both regions.
`Industrial demand for palladium climbed by 55,000 oz to 2.39 million ounces. The chemical industry bought a
`net 350,000 oz of palladium in 2008, a decrease of 25,000 oz from 2007 and less than we had previously forecast.
`Fewer new chemical plants were constructed in 2008 than in 2007 and demand was trimmed further at the end
`of the year as low operating rates in this industry translated into reduced requirements for top-up catalyst.
`Dental sector demand for palladium was unchanged at 630,000 oz. Net palladium use in Japan was flat at
`275,000 oz as lower gross manufacturing demand was balanced by a fall in recycling of scrap dental alloy. In
`North America, demand rose by 5,000 oz to 270,000 oz.
`The electronics industry purchased a net 1.33 million ounces of palladium in 2008, representing the seventh
`successive year of demand growth in this sector. The increasing complexity of consumer electronics has driven
`a long-term increase in the number of passive components – such as palladium-containing multi-layer ceramic
`capacitors – per device. Consumer sales were strong for much of 2008 before weakening in the final months.
`Palladium demand therefore grew in 2008 but is expected to shrink in 2009.
`Physical investment demand for palladium increased by 140,000 oz in 2008 to 400,000 oz with European
`investors buying 370,000 oz of palladium through Exchange Traded Funds (ETFs). Compared to the platinum
`market, buying and selling of metal were not so closely related to movements in the metal price, suggesting that
`investors in this metal may be acquiring it for longer-term returns. While platinum ETF demand fell, palladium
`demand through ETFs climbed by 90,000 oz. Net purchases of coins and large bars rose to 30,000 oz.
`Global supplies of palladium fell by 14.8 per cent in 2008 to 7.31 million ounces. Supplies from South Africa
`decreased by 12.1 per cent to 2.43 million ounces, reflecting the range of problems experienced there. Russian
`mine production slipped from 3.05 million ounces in 2007 to 2.70 million ounces in 2008 despite stable nickel
`output. North American supplies of palladium fell by 80,000 oz to 910,000 oz as Stillwater refocused production on
`its larger mine and North American Palladium placed its Lac des Iles mine on care and maintenance in the final
`quarter of the year. Supplies of palladium from Zimbabwe and elsewhere grew from 285,000 oz to 310,000 oz.
`We believe that sales of Russian state stocks (metal which had not previously been priced) decreased from
`1.49 million ounces in 2007 to 960,000 oz in 2008. There were substantial shipments of metal from Russia to
`Switzerland in December 2007 and in the second half of 2008. However, we do not believe that all of this metal
`was sold into the market: our current expectation is that the remainder of this metal will instead be sold in the
`next few years.
`The palladium price largely tracked movements in the platinum price for much of 2008. It started the year
`at $370 and followed platinum higher in the first
`quarter of the year. It reached a peak of $588,
`its highest price since 2001, on the 4th of March
`before the price retreated to $450 by the middle
`of the year. In the second half of 2008, industrial
`purchasing weakened, removing some support
`from the palladium price. Investors reacted to
`the panic in the financial markets by selling very
`large quantities of palladium. The US Dollar
`strengthened too, reinforcing the downward
`move in the palladium price. As worries over
`the credit ratings of some of the auto makers
`intensified, the price was driven to a low of $164
`in early December. In the final weeks of 2008, US
`government proposals to provide some support to
`the car manufacturers helped the price to recover
`some lost ground to end the year at $183.50.
`
`Jewellery
`Jewellery
`
`Electronics
`Electronics
`
`Other
`Other
`
`South Africa
`South Africa
`
`Russia
`Russia
`
`North America
`North America
`
`Others
`Others
`
`9 8 7 6 5 4 3 2 1 0
`9 8 7 6 5 4 3 2 1 0
`
`Autocatalyst
`Autocatalyst
`(net)
`(net)
`
`9 8 7 6 5 4 3 2 1 0
`9 8 7 6 5 4 3 2 1 0
`
`2004 2005 2006 2007 2008
`2004 2005 2006 2007 2008
`
`2004 2005 2006 2007 2008
`2004 2005 2006 2007 2008
`
`Platinum 2009
`
`page 7
`
`BASF-2038.009
`
`

`
`0
`
`2004 2005 2006 2007 2008
`
`Demand for Iridium
`
`Demand for Rhodium 2004-2008
`‘000 oz
`
`Autocatalyst
`(net)
`1,000
`
`Chemical
`
`Glass
`
`Electrical
`& Other
`
`800
`
`600
`
`400
`
`200
`
`0
`
` 2004 2005 2006 2007 2008
`
`Summary
`
`OTHER PGM
`
`Rhodium
`
`Demand for Ruthenium 2004-2008
`‘000 oz
`
`Net rhodium demand fell by 18.4 per cent to 689,000 oz in 2008. A slowdown in
`demand from the global automotive market was the main cause of this fall as gross
`demand in the sector decreased by 14.3 per cent to 760,000 oz. Demand from the glass
`sector also declined despite continued growth in production capacity for LCD glass.
`Supplies of rhodium, from South Africa and elsewhere, fell to 695,000 oz. Rhodium
`was therefore, after four successive years of deficits, in a small surplus of 6,000 oz.
`Gross automotive industry purchases of rhodium fell by 127,000 oz to 760,000 oz in 2008.
`The high price of rhodium in recent years has driven extensive development activity by
`the car manufacturers and catalyst producers on reducing consumption of this metal. The
`results of this work were apparent in 2008 as auto makers were able to fit new, thrifted,
`lower-rhodium three-way catalyst formulations on many of their vehicles. The average
`rhodium content of a gasoline vehicle therefore fell in most regions. In Japan, for instance,
`where production was almost flat, gross rhodium