China's Platinum Jewelry Demand to Weaken-Johnson Matthey

Source:

"We saw a lot of restocking by Chinese manufacturers. . ."

Chinese demand for platinum jewelry will probably weaken this year, after surging to a record in 2009, and strengthen in Europe and the U.S., according to Johnson Matthey Plc.

Investment in the metal should also expand, creating a narrower margin between supply and demand and driving prices as high as $2,000/oz., Johnson Matthey said in a report. That would be the highest since July 2008. China accounted for 69% of global demand for platinum jewelry last year after consumption in the country almost doubled.

"We saw a lot of restocking by Chinese manufacturers," said Mark Bedford, director of precious metals marketing. "Jewelry demand outside China—in Europe and the U.S.—could be a bit better this year, but China is really the elephant in the room."

Platinum is up 15% this year and traded at $1,692.50/oz. at 11:53 a.m. in London today. The metal advanced 57% in 2009 on expectations a recovering economy would boost demand and as investment climbed to a record. Platinum may trade as low as $1,600 in the next six months, Johnson Matthey said.

Platinum investment demand rose 19% to 660,000 ounces last year, while palladium investment advanced 49% to an all-time high 625,000 ounces. ETF Securities Ltd. started ETFs backed by both metals in the U.S. at the beginning of the year.

"We're seeing fairly steady investment in the U.S. funds and we think they'll get bigger," Bedford said. "The industrial fundamentals of platinum and palladium demand are quite strong and will continue to be quite strong. . .," he said.

Palladium may climb to a nine-year high of $700/oz. in the next six months as its 2009 760,000-ounce surplus narrows. Palladium more than doubled in 2009 and is up 26% this year at $514.

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