Producers can’t cut back fast enough to offset a glut

Mar 19, 2009 | 04:40 AM |

Like most metals, platinum group metals (PGMs) have seen a sharp supply-side response to falling prices and deteriorating automotive demand.

In the past year there have been two distinct stories in the platinum group metals market. Razor-sharp fundamentals pushed platinum to a record $2,276 per troy ounce in March last year, but the global financial crisis and the collapse of the domestic auto industry resulted in demand falling precipitously, and by late October platinum prices had plunged nearly 68 percent to $732 per ounce. The picture was similar for both palladium and rhodium.

On top of that, the credit crunch and increased risk-aversion forced investors into a massive sell-off of platinum group metals. The impact on supply-side consumption was dramatic.

"In the (second half of 2008) people panicked and the funds looked to liquidate anything and everything that had cash value," one New Jersey-based platinum group metals trader said.

Platinum group metals are most commonly used in automotive catalytic converters, followed by catalysts for various industrial processes. Because of the slowdown in the auto sector and falling prices for the metals, there has been a significant supply-side response.....