Current PGM demand has made many projects unfeasible. But the fall in demand could also obliterate the deficit which has plagued the market over the past few years as well as push the market into a surplus until at least 2014. We expect demand to fall by almost 8% y/y, to 7,22m oz in 2009. Thereafter, we expect a y/y increases for platinum demand. The fall in demand is driven by car sales which could decline by 7m units from levels reached in 2008 as consumers in the US and Eurozone struggle to cope with economic conditions. We expect little support from jewellery demand which we expect to remain largely unchanged. Other industrial uses are also set to decline. In 2010, we expect a recovery in demand. While y/y growth rates could rise, the amount of platinum oz actually consumed would only reach the levels seen last year in 2011. By 2014, we estimate that total demand for platinum could reach 9.125m oz.
Platinum mine supply in 2008 is estimated at 6.7m oz. While we have already seen production cuts at platinum mines in South Africa, we doubt production cuts could completely offset the fall in demand in 2009. At current price levels, we expect production cuts of between 400K and 500K oz. Working with the low end of the range and adding 190K oz of new platinum supply coming to market, total supply should be 7.51m oz in 2009.
Furthermore, in H2:10, as demand starts to pick up, operations which were shut down this year could restart (we estimate 400K), allowing for supplyto come to the market faster than any new developments. We have assumed that the cutbacks are brought to market in equal proportions in 2010 and 2011. Another source of supply is scrap. While this is not set for a massive rise until 2011, scrap and recycled platinum could reach 1.8m oz by 2014. This, we believe, could see the platinum market in a constant surplus until 2014. Should recycled metal increase as mentioned, and demand is close to our assumed numbers, the surplus would rise rapidly as we approach 2014. Above-ground stock would rise as a result. Should this happen, it should restrain prices.
We use our PGM cost model to estimate a price for platinum, palladium and rhodium that is consistent with our estimate of a surplus of 300K oz of platinum in 2009, and the surpluses in following years. In our cost model, we assume mining inflation at 10% y/y until 2014 and ZAR/ USD at $10 in real terms. While cost inflation is low compared to mining inflation in the recent past, current deflationary forces should push some mining costs lower. We further assume that new projects would, in 2008 prices, not be more expensive than current operations. This assumption is justified on the premise that any mine more expensive than current mines would not be a viable operation, given the expected surplus in the market.
There is a caveat to our approach. Above-ground stock ofplatinum could rise by another 3.2m oz by 2014, from the current estimate of about 1m oz. As a result, the market could see this as excessive, and prices might fall. Above-ground stock of 4.2m oz would translate into a 160 days of consumption (at our 2014 demand levels) and this is much higher than the current estimate of 40 days. Arguably, some of the projects listed would not come to market, or at a much smaller scale.
Showing posts with label US. Show all posts
Showing posts with label US. Show all posts
Friday, January 30, 2009
Tuesday, November 25, 2008
Global meltdown rubs off the sheen from Indian diamond industry
India's diamond industry seems to be losing its sheen with global recession hitting its exports.
Those associated closely with the industry at Surat in Gujarat are struggling to survive the current recessionary trends.
The traders say that the diamonds processed in Surat are sent to various parts of the world including the Middle East from where manufactured jewellery is then sold across the globe.
The US, one of the largest markets for diamonds and other gemstones, would import 60% of diamonds manufactured in Surat. But these imports have come down by half due to deep economic crisis that America is currently reeling under.
With the financial turmoil spilling over to the rest of the world, the demand for diamond jewellery is declining in the international markets. Diamond traders said that domestic markets too are no better and don't see any respite in the near future.
"Due to the global recessionary trends the diamond industry world over is facing problems and so is our fraternity in Surat. The effect is being feltmore than ever before and we are trying to fight it. But how long would the industry be able to fight it and survive, it is a matter of concern. I don'tsee any respite in the near future," said CP Wananai, President, Diamond Association, Surat.
The Surat diamond industry is worth Rs800,000mn and accounts for more than half of the total diamond exports from India. It employs more than 700,000 workers from across the country. Over 2.5mn people are indirectly associated with the trade. These workers are uncertain about their jobs. The one-month annual vacation that these workers get during Diwali, the Hindu festival of lights, is being extended, sparking off fears that many companies might have to close down.
"I have been in this industry for around 10 years now. We have already had a vacation of 40 days now. My salary is just Rs7000 per month and I had spent almost all of it during the festive season. I don't have anything now. I am somehow trying to survive. The situation is really bad. I don't even want to think about what can be done if the situation doesn't improve," said Manish Bhai, a diamond worker.
With the 40-day vacation ending on Monday (November 17), the diamond unions are scheduled to meet to discuss the situation and likely possibilities to save the livelihood of the millions of workers associated with diamond trade. Reducing the number of working hours and decreasing the salary proportionately are among various options being thought of as against laying off of workers.
Meanwhile, the diamond industry is lobbying hard to get a bailout package from the government. India's diamond industry has been reeling under a spate of problems. Around 2,000 factories out of 10,000 have already shut down.
The worst-hit diamond cutters and polishers have not yet lost hope about the markets regaining their lost glitter but feel that would take a couple of months.
Monday, November 24, 2008
Indian jewellers in recessionary pain: Reuters
Jaipur jewellery manufacturers and exporters are in a recession pain. Gobal recession disease have caught the traders and the very first symptom is falling export orders.
Until last year traders dealing in gems and jewellery segment were earning huge profits. But now the situation has reversed, gem city is facing an adverse impact of recession in the global economy.
Recession has directly hit the jewellery manufacturers and exporters as there is no more order booking coming from the offshore buyers. Jeweller exporters fear the impact would be felt in the coming quarter.
"As far as global recession is concerned, people are thinking that the sales may go down. If the sales go down during the Christmas season, then the impact can be seen in the next quarter," said Jagdish Tambi, Spokesperson, Jaipur Jeweller's Association.
Majority of the jewellery is exported to the US and the there has been a sharp fall in the quantity of export due to recession in the US. Falling exports has also resulted in sizable retrenchment of workers in the jewellery industry.
"There are a lot of people who have lost jobs because export orders have been cancelled. Lesser order, lesser work, every body can feel the impact. It is not that the recession is affecting the US only," said Sudheer Kasliwal, an exporter.
What started in the US about 18 months ago as a housing mortgage crisis has slowly engulfed the whole world and India is no exception.
Until last year traders dealing in gems and jewellery segment were earning huge profits. But now the situation has reversed, gem city is facing an adverse impact of recession in the global economy.
Recession has directly hit the jewellery manufacturers and exporters as there is no more order booking coming from the offshore buyers. Jeweller exporters fear the impact would be felt in the coming quarter.
"As far as global recession is concerned, people are thinking that the sales may go down. If the sales go down during the Christmas season, then the impact can be seen in the next quarter," said Jagdish Tambi, Spokesperson, Jaipur Jeweller's Association.
Majority of the jewellery is exported to the US and the there has been a sharp fall in the quantity of export due to recession in the US. Falling exports has also resulted in sizable retrenchment of workers in the jewellery industry.
"There are a lot of people who have lost jobs because export orders have been cancelled. Lesser order, lesser work, every body can feel the impact. It is not that the recession is affecting the US only," said Sudheer Kasliwal, an exporter.
What started in the US about 18 months ago as a housing mortgage crisis has slowly engulfed the whole world and India is no exception.
Gold prices climb due to global economic slump: Karvy Comtrade
Gold prices traded in the range of $729.6-$802.8 a troy ounce, as the firmer US dollar propelled a volatile movement in the precious metals sector. The slump in equities in conjunction to the deepening crisis has eroded the investor confidence, thereby proving negative for the precious metals. The price of crude oil dropping below $49 a barrel renewed speculation that a global recession will cut demand for precious metals and raw materials. The dollar rose against the euro as prices paid to U.S. producers plunged and homebuilder confidence fell, increasing demand for the safety of government debt indicted by the substantial increase in TIC flows.
However, prices erased earlier losses and moved higher on speculation the Federal Reserve will lower interest rates to stimulate the U.S. economy, boosting the appeal of the precious metal as an alternative asset. The yield on two-year Treasury notes dropped below 1 percent for the first time ever on bets the Fed will cut its benchmark rate next month. The poor housing sector performance, steep increase in jobless claims and contracting manufacturing activity helped gold prices to move higher. On the weekend, gold prices climbed as the global economic slump dragged down asset prices and boosted the appeal of the precious metal as a store of value.
According to the world gold council, the demand for the precious metal increased 18 % in the third quarter as lower prices encouraged purchases by jewelers and as investors sought a haven from the credit crisis. So-called identifiable investment, which includes purchases through exchange-traded funds and of bars and coins, climbed 56 % to 382.1 tons during the quarter.
Other precious metals, which have wider industrial applications than gold, fell on concern that a global recession may damp demand for all commodities. The International Monetary Fund projected that economies in the U.S., Japan and the euro zone will all shrink in 2009.
This week, fundamentally we expect gold prices to trade sideways amid lower US GDP growth (P), declining home sales and durable goods orders. The gains are likely to be limited by the strengthening dollar and poor economic condition in euro-zone.
However, prices erased earlier losses and moved higher on speculation the Federal Reserve will lower interest rates to stimulate the U.S. economy, boosting the appeal of the precious metal as an alternative asset. The yield on two-year Treasury notes dropped below 1 percent for the first time ever on bets the Fed will cut its benchmark rate next month. The poor housing sector performance, steep increase in jobless claims and contracting manufacturing activity helped gold prices to move higher. On the weekend, gold prices climbed as the global economic slump dragged down asset prices and boosted the appeal of the precious metal as a store of value.
According to the world gold council, the demand for the precious metal increased 18 % in the third quarter as lower prices encouraged purchases by jewelers and as investors sought a haven from the credit crisis. So-called identifiable investment, which includes purchases through exchange-traded funds and of bars and coins, climbed 56 % to 382.1 tons during the quarter.
Other precious metals, which have wider industrial applications than gold, fell on concern that a global recession may damp demand for all commodities. The International Monetary Fund projected that economies in the U.S., Japan and the euro zone will all shrink in 2009.
This week, fundamentally we expect gold prices to trade sideways amid lower US GDP growth (P), declining home sales and durable goods orders. The gains are likely to be limited by the strengthening dollar and poor economic condition in euro-zone.
Tuesday, October 21, 2008
Analysts expect gold to resume lower trend
Market is expected to make a higher opening and the immediate resistance can be seen at Rs12,800 levels. Likewise, the supports are at Rs12,650 and then Rs12,570 levels. Analysts are expecting gold to resume lower trend after a brief higher correction.
Gold prices remained range bound and traded sideways in Monday’s session, in the absence of any major economic trigger.
The only economic data from the US was the leading indicator for the month of September, which unexpectedly rose thereby giving a lift to the dollar, said a Kravy Comtrade report.
For the day, as the market awaits no economic data, prices are likely to remain sideways. However the report also said that the strengthening US dollar is likely to put pressure on the bullion market, hence indicating a bias on the lower side.
The dollar advanced for a fifth day against the euro after Federal Reserve Chairman Ben Bernanke endorsed additional fiscal stimulus to support the US economy. The dollar traded at 18-month high levels against the euro on this act of the chairman, it said.
The MCX December contract for gold prices were seen trading sideways while closing it formed a technical Doji pattern in the daily chart and closed at Rs12,682 levels.
Gold prices remained range bound and traded sideways in Monday’s session, in the absence of any major economic trigger.
The only economic data from the US was the leading indicator for the month of September, which unexpectedly rose thereby giving a lift to the dollar, said a Kravy Comtrade report.
For the day, as the market awaits no economic data, prices are likely to remain sideways. However the report also said that the strengthening US dollar is likely to put pressure on the bullion market, hence indicating a bias on the lower side.
The dollar advanced for a fifth day against the euro after Federal Reserve Chairman Ben Bernanke endorsed additional fiscal stimulus to support the US economy. The dollar traded at 18-month high levels against the euro on this act of the chairman, it said.
The MCX December contract for gold prices were seen trading sideways while closing it formed a technical Doji pattern in the daily chart and closed at Rs12,682 levels.
Monday, October 20, 2008
US Federal testimony awaited: Karvy Comtrade
On account of weakening US dollar today bullion prices are trading higher by almost $12 on account of weakening US dollar. The dollar is seen to weaken on concern that the US Federal Chairman may forecast a prolonged downturn when he speaks today.
Ben Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 10 am in Washington. The continued poor economic data emerging from the nation has lead to poor economic outlook for the world’s largest economy.
Single-family home building sank to the slowest pace in 26 years in the US in September and the industrial production index dropping to 2.5 years lows, has increased lower economic prospects. The economic sentiment is badly hit as there seems to be no symptoms of revival in the housing sector.
No major economic data is awaited today; however the outcome of the US Federal chairman’s testimony will be crucial to watch out for. Prices are likely to remain on the sidelines for the day, on back of the weaker US dollar and uncertainty of the economic revival.
“The December contract gold on MCX traded lower and posted a lower closing at Rs12,587 levels. Market is moving lower as it is trading below the 50-day EMA in the daily chart. Market is likely to take an initial correction and the immediate resistance is seen at Rs12,624-Rs12,650 levels. If prices are sustaining below the resistance we may expect market trading lower. The supports are at Rs12,400 then Rs12,325 levels,” said a daily commodity report by Karvy Comtrade.
Ben Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 10 am in Washington. The continued poor economic data emerging from the nation has lead to poor economic outlook for the world’s largest economy.
Single-family home building sank to the slowest pace in 26 years in the US in September and the industrial production index dropping to 2.5 years lows, has increased lower economic prospects. The economic sentiment is badly hit as there seems to be no symptoms of revival in the housing sector.
No major economic data is awaited today; however the outcome of the US Federal chairman’s testimony will be crucial to watch out for. Prices are likely to remain on the sidelines for the day, on back of the weaker US dollar and uncertainty of the economic revival.
“The December contract gold on MCX traded lower and posted a lower closing at Rs12,587 levels. Market is moving lower as it is trading below the 50-day EMA in the daily chart. Market is likely to take an initial correction and the immediate resistance is seen at Rs12,624-Rs12,650 levels. If prices are sustaining below the resistance we may expect market trading lower. The supports are at Rs12,400 then Rs12,325 levels,” said a daily commodity report by Karvy Comtrade.
Monday, October 6, 2008
Markets still shaky: Standard Bank
US legislators passed the much disputed $700bn rescue bill late on Friday but markets are not convinced of its ability to revive gridlocked credit markets, said a report by Standard Bank.
While US inter- bank lending rates have declined, they’re still extremely high, it said. Despite authorities’ efforts, banks remain suspicious of counterparties’ ability to honour financial obligations.
Scepticism around the rescue plan is also being demonstrated by Asian equities having fallen sharply this morning, the report said. The Nikkei was down more than 4%, followed by the Hang Seng at 3.5%. US equity futures have lost more than 1.5%, possibly signalling another red day in US equity markets.
Global fears continue to translate into high demand for US Treasuries at the expense of other assets. The main beneficiary have been the USD which has gained ground from $1.3850 to as low as $1.3605 against the euro.
“We expect this trend to continue if the Europe and the US track Asian markets later today,” said Standard Bank’s commodity analyst Walter De Wet.
On the data front, Friday’s US non-farm payrolls, which declined by 159,000 which was much more than the estimated forecast decline of 100,000 adds to the list of negative data.
“Faced with a stronger dollar, PGM and silver will see little support. We estimate the average PGM basket price currently at $847/oz. While the market is currently more concerned about demand, persistent low prices would put many mines in financial difficulty,” said Walter.
Walter also mentioned that the yellow metal is still dithering and with investors unwilling to commit to major positions on Friday, gold traded erratically at $845/oz-$825/oz.
After finding some support early in Asia, which pushed gold from $830/oz to $845/oz, gold lost its direction as the dollar drifted around $1.383. A series of sharp spikes followed when US markets opened, but gold remained stuck at $825/oz-$845/oz. It closed at $828.5/oz on Friday, and held up well in the aftermarket after the rescue plan was passed, reflecting the lingering concerns in financial markets, said the report.
“Primary support is at $821/oz, and secondary support at $807/oz and $803/oz. Resistance is at $848/oz, $861/oz, and $888/oz,” said Walter.
The report mentioned that silver initially found solid support in Asia as it gained $0.65, to trade at $11.40/oz, before it stabilized in Europe. Renewed buying support in New York saw the metal shoot to $11.70/oz, just to subside again when gold lost steam. Silver ended the week at a bid of $11.25/oz.
“Primary support is at $11.00/oz and secondary support at $10.88/oz-$10.70/oz. Primary resistance is at $11.65/oz, and secondary at $12.00/oz,’ said Walter.
Platinum remains under pressure; on Friday, trade was choppy. The metal failed to break above $1,000/oz, bouncing between $950/oz and $980/oz. With the stronger dollar, platinum could remain under pressure today. It closed at $955/oz on Friday.
Palladium is holding up well despite platinum’s move lower. Although the metal dropped to $195/oz on Friday, it managed to claw its way back in New York and closed at $198/oz. Rhodium lost $60/oz, to fix at $3,210/oz in New York, it said.
While US inter- bank lending rates have declined, they’re still extremely high, it said. Despite authorities’ efforts, banks remain suspicious of counterparties’ ability to honour financial obligations.
Scepticism around the rescue plan is also being demonstrated by Asian equities having fallen sharply this morning, the report said. The Nikkei was down more than 4%, followed by the Hang Seng at 3.5%. US equity futures have lost more than 1.5%, possibly signalling another red day in US equity markets.
Global fears continue to translate into high demand for US Treasuries at the expense of other assets. The main beneficiary have been the USD which has gained ground from $1.3850 to as low as $1.3605 against the euro.
“We expect this trend to continue if the Europe and the US track Asian markets later today,” said Standard Bank’s commodity analyst Walter De Wet.
On the data front, Friday’s US non-farm payrolls, which declined by 159,000 which was much more than the estimated forecast decline of 100,000 adds to the list of negative data.
“Faced with a stronger dollar, PGM and silver will see little support. We estimate the average PGM basket price currently at $847/oz. While the market is currently more concerned about demand, persistent low prices would put many mines in financial difficulty,” said Walter.
Walter also mentioned that the yellow metal is still dithering and with investors unwilling to commit to major positions on Friday, gold traded erratically at $845/oz-$825/oz.
After finding some support early in Asia, which pushed gold from $830/oz to $845/oz, gold lost its direction as the dollar drifted around $1.383. A series of sharp spikes followed when US markets opened, but gold remained stuck at $825/oz-$845/oz. It closed at $828.5/oz on Friday, and held up well in the aftermarket after the rescue plan was passed, reflecting the lingering concerns in financial markets, said the report.
“Primary support is at $821/oz, and secondary support at $807/oz and $803/oz. Resistance is at $848/oz, $861/oz, and $888/oz,” said Walter.
The report mentioned that silver initially found solid support in Asia as it gained $0.65, to trade at $11.40/oz, before it stabilized in Europe. Renewed buying support in New York saw the metal shoot to $11.70/oz, just to subside again when gold lost steam. Silver ended the week at a bid of $11.25/oz.
“Primary support is at $11.00/oz and secondary support at $10.88/oz-$10.70/oz. Primary resistance is at $11.65/oz, and secondary at $12.00/oz,’ said Walter.
Platinum remains under pressure; on Friday, trade was choppy. The metal failed to break above $1,000/oz, bouncing between $950/oz and $980/oz. With the stronger dollar, platinum could remain under pressure today. It closed at $955/oz on Friday.
Palladium is holding up well despite platinum’s move lower. Although the metal dropped to $195/oz on Friday, it managed to claw its way back in New York and closed at $198/oz. Rhodium lost $60/oz, to fix at $3,210/oz in New York, it said.
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