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(Kitco News) - The global platinum market was in a supply surplus of 430,000 ounces in 2011 and a similar balance is expected this year, said Johnson Matthey in its “Platinum 2012” report issued Monday.

Johnson Matthey had put the market in a slight deficit of 25,000 ounces in 2010.

Another surplus in 2012 is likely to keep platinum prices in a range of $1,450 to $1,750 per ounce in the next six months, averaging $1,600, said the report, widely followed in the metals industry. Johnson Matthey factors in investment demand when calculating supply/demand balances.

Gross platinum demand rose by 2% in 2011 to 8.1 million ounces.

“We had modest growth in the jewelry sector and modest growth in the autocatalyst sector despite some of the woes we saw in Europe,” said Tim Murray, general manager for precious metals marketing with Johnson Matthey. Perhaps the most significant development in the platinum industry last year, he said, was a jump in demand for other industrial applications, which the report put at 17%.

Meanwhile, supply from primary producers increased to a four-year high of 6.48 million ounces, supplemented by releases of in-process and refined inventories from South Africa in the second half. Recycling added another 2.05 million ounces.

For 2012, lower inventories in South Africa after the drawdowns of last year mean that the industry now has less flexibility to supplement platinum supplies with metal from stocks, the report said. Recent output disruptions due to strikes and other stoppages increase the likelihood of lower supplies in 2012. However, Johnson Matthey said, flat autocatalyst demand and more moderate levels of purchasing in cyclical industrial applications should lead to a slight fall in gross demand.

Platinum Supplies Lifted By Inventory Releases In South Africa

The 6.48 million ounces in platinum supplies from primary producers last year represented an increase of 7%. Underlying mine production in South Africa fell by around 120,000 ounces. However, releases of metal from inventories meant that total shipments from South Africa rose by 5% to 4.86 million ounces, Johnson Matthey said. Ramped-up mine output in North America following shutdowns in 2010, plus new and expanding operations in Zimbabwe, also contributed “significant additional ounces,” Johnson Matthey said.

Recycling of platinum increased by 12% in 2011. Recovery from spent autocatalysts rose by 140,000 ounces to 1.23 million. Stimulated by higher average metal prices, recycling of platinum in the jewelry sector rose by 10% to 810,000 ounces.

Meanwhile, gross platinum demand in vehicle emissions control grew by 1% to 3.11 million ounces, Johnson Matthey said. Purchasing of platinum by the heavy-duty diesel sector rose 27% to 515,000. Much of this growth was due to pent-up demand for large trucks in North America as fleet operators returned to the market following the recession of 2009-2010. However, Johnson Matthey said there was lower use of platinum in light-duty emissions control due to substitution by palladium, as well as reduced buying by Japanese manufacturers in the wake of the massive earthquake that hit the nation in 2011.

Purchases of platinum for other industrial applications rose by 17% to 2.05 million ounces, according to the report. “Last year was about growth in petro-chemical and pre-buying by the glass sector,” Murray said.

Recovery from recessions in developed markets and rapid growth in emerging ones drove a period of capacity building in a number of industrial sectors, said the report. In particular, demand for liquid crystal display, or LCD, panels in consumer electronics led to the installation of several new melting tanks in Asia, used in the manufacture of LCD glass.

Jewelry manufacturers bought 2.48 million ounces of platinum last year (see separate story), an increase of 2%.

Physical investment demand for platinum remained positive but was 30% lower than in 2010, coming in at 460,000 ounces, Johnson Matthey said. There was net investment into exchange-traded funds, with inflows tending to coincide with periods of rising prices. Substantial purchasing of large platinum bars by Japanese investors once again occurred during price dips, the report said.

By Allen Sykora of Kitco News; asykora@kitco.com

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