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Biggest Deficit In Platinum Since 1999

|Includes:Sylvania Platinum Limited (SAPLF)


The platinum market in 2013 is set for its biggest deficit in 14 years and continuing strong industrial and jewellery demand may widen the gap next year, although higher supply, stock overhangs and slow autocatalyst demand could limit price gains.

Refiner Johnson Matthey said on Tuesday in its Platinum 2013 Interim Review that the platinum market was expected to show a shortfall of 605,000 ounces this year from 340,000 ounces last year.

"The platinum market is expected to be in significant deficit for a third consecutive year in 2014," the industry benchmark report said. "However, this may not be sufficient to support higher prices as long as the market remains adequately supplied from above-ground stocks."

The additional problem is that most of the miners mining platinum are not making back their cost of capital. That is why they are so resistant to raising wages at their mines in South Africa. Eventually this will resolve with higher prices. You cannot continue to mine any metal and not recover your cost of capital. Patience will be required but prices will have to move higher to keep supply from falling.

Disclosure: I am long OTC:SAPLF.

Stocks: SAPLF