Platinum will be costlier in 2010; demand may rise by 2%

Platinum prices are likely to remain high in 2010, while the global demand may rise by just five per cent due to rise in investments and improved economic outlook, a GFMS report said.

"The prices will remain at elevated levels, boosted by a further rise in investment demand for commodities in general, as inflationary concerns continue to develop," London-based global precious metal consultancy said in the report.

Meanwhile, it said, even as platinum autocatalyst and industrial demand may benefit from the improved economic outlook, it will be partially offset by weaker jewellery demand, principally in China. Therefore, GFMS forecast a modest five per cent rise in global demand.

Meanwhile, the gross surplus of the precious metal is expected to remain at historically high levels in 2010, it added. The gross surplus in 2009 surged by 47 per cent to 8,49,000 ounces, the largest surplus recorded by GFMS in its 11 year data series.

The high surplus was due to weaker global demand that fell by 14 per cent to 6.41M ounces, lowest level since 1999.

The economic downturn also fed through to lower industrial demand, with a sharp reduction in planned capacity expansions impacting the glass industry in particular, it pointed out. However, GFMS also said, the size of the gross surplus in 2009 was contained by a near 800,000 ounce, or 10 per cent, due to drop in global platinum supply.

In spite of the larger gross surplus for platinum last year, prices achieved an uninterrupted rise in 2009, a situation which continued this year mainly due to a surge in investment demand, especially the growth in ETF, which added nearly 390,000 ounces.

In fact, it said, this trend shows little sign of slowing in 2010, encouraged by the launch of two new funds, including ETF Securities' product in the US, which has accumulated almost 340,000 ounces in less than four months.

The report further added that mine production fell by a marginal two per cent, after heavy falls in 2007 and 2008, due to drop in autocatalyst scrap supply.