The second-round effects of the global recession are beginning to be felt in the platinum industry, with what is principally an industrial metal being hammered by dramatic falls in consumption.

Johnson Matthey's director of precious metals marketing, Mark Bedford, on Monday warned that the global recession, which had already pushed the platinum price below the $1000 an ounce mark, would also play out on the supply and demand side of the market.

Platinum supply is expected to be outpaced by demand again in 2008 after moving into a deficit of 480 000 ounces in 2007 from a surplus of 335 000 ounces in 2006.

Besides the production constraints such as power shortages in South Africa where 80 percent of platinum is produced, new supply from projects coming on stream is now under threat.

"Supply should still rise in the medium term, but it is obvious to say that the low prices we are seeing will jeopardise the pace and the longevity of projects," Bedford said.

Platinum lost 60% of its value

Platinum has lost about 60 percent of its value in the past six months.

It has fallen from a record $2290 in March to $955 in Asia on Monday morning.

On the demand side, Bedford sees the global recession hurting the global automotive sector hardest.

The automotive industry accounts for around half of the world's annual platinum demand, with platinum purchases by the autocatalyst sector climbing by 8.2 percent to 4.23 million ounces in 2007.

Economic pressure is already harming automakers with the US last week reporting a decline of almost 30 percent in car sales.

Home to the world's largest car market, the US automotive industry's declining sales cloud the outlook for the balance of the global automotive industry but particularly other gasoline markets like China.

Bedford added that while it was previously thought that the BRIC (Brazil, Russia, India and China) countries would be little affected by the global economic downturn, they are now expected to be hit as well.

While 2008 is again likely to be in deficit, Bedford said in the months and years to come, the trend is towards balance and even a platinum surplus.

At the end of the day, he said, consumerism would rise again. People will buy more cars and more jewellery and this is good news for platinum.

I-Net Bridge