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Platinum's Prospects Better and Better

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"Auto demand and South African supply issues create a perfect PGM storm."

Growing demand for diesel cars and trucks and a continued tight supply side, mean platinum's outlook is pretty good.

According to Leon Esterhuizen of RBC Capital Markets, while the "pressure cooker" situation that was anticipated at the beginning of the year as a result of a supply side squeeze has reduced somewhat recently because of unforeseen events such as the earthquake in Japan, there is still likely to be a shortage of the metal this year.

Speaking on Mineweb.com's Metals Weekly podcast, Esterhuzien added that while the impact of the Japanese crisis remains uncertain, it is interesting to note that, "Impala [Platinum] said recently that all of its Japanese clients continue to take metal even though they offered them the opportunity not to take metal right now."

"That sort of tells you that the people who are fundamentally involved in this market understand that there is probably going to be a shortage of metal—even if you're not using it right now, you better take it and you better start building stockpiles."

Part of the reason for this is the continued concern about the supply of PGMs from South Africa. Last week, Anglo Platinum, for example, which faces dwindling production.

"If you look at things like the labor union activity that's currently building up—unions really starting to flex their muscles saying that this is the year they want another 15% raise—there is a real possibility for disruption there."

Over and above that, the country's continued power worries mean, "it's going to get a lot worse in 2012 and 2013 in terms of power supply."

On the automobile front, Esterhuizen says that, while Chinese auto sales growth for March disappointed the market, U.S. growth is making up for it.

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