Platinum price is unsustainable, increase inevitable – SFA Oxford

Otmane El Rhazi from The Bullion Desk.

Today’s platinum price is unsustainable, SFA Oxford’s Stephen Forrest told delegates at the LPPM seminar on Tuesday.

“An eventual rise is inevitable,” he said, “there is an impending imbalance in the market.” 

This is good news for producers, Forrest added, particularly those looking to bring on new sources of supply.

His comments come at a time where many observers are wondering how producers will tackle mines that are not viable at current price levels and whether or not they have plans to reduce supply to try to get some traction going in the market.

Platinum is currently down six percent for the year at $1,149.00 per ounce. Prices are now down 50 percent since the all-time peaks hit in 2008 at $2,300 per ounce. The metal recently struck its lowest since the post-peak crash during 2008/2009 at $1,080.

The metal continues to defy the logic of a supply deficit – even during the heights of last year’s costly five-month strike that skewed annual production figures, platinum peaked at just $1,520 per ounce – it had started the year at $1,371 and closed it 12 percent lower at $1,206.

But at current levels, Forrest says that by SFA Oxford’s calculations, the market is trading below the average break even price of $1,250 per ounce.

“We don’t believe that there is a trap door below this price, we are very near the bottom of a cycle,” he added.

Though, he also told delegates that in the months ahead, mines will more than likely overshoot the requirements for consumers, which may  supress prices near the aforementioned break even level.

“Unsustainably lower platinum price informed by short term market balance, will eventually fall back on industry fundamentals thereafter the invetability of imbalance promises longer-term price support,” he said.

(Editing by Tom Jennemann)

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