Global demand for platinum dropped five percent to 6.35 million ounces last year, metals refiner Johnson Matthey said on Monday.

In its Platinum 2009 market review, it said the precious metal was expected to trade between US$950 and $1350 an ounce over the course of this year.

"We expect jewellery demand to keep prices above $950 at the bottom end, and if industrial demand starts to show a rally, we could see trading at a level of $1350."

Although demand has been particularly poor in the automotive and industrial sectors, strong jewellery purchases in China so far this year had offset the trend, the report said.

South Africa continued to be the world's largest platinum producer, with output of 4.53 million ounces last year.

However, global supplies fell 9.5 percent due to what the report called "a range of issues" in South Africa.

"In the end, the electricity problems, which hit the industry in the early part of the year, only accounted for about 60 000 ounces of lost production, but pretty much all producers suffered problems of one form or another, be that flooding, smelter outages, labour issues, or shaft refurbishments."

Turning to palladium, Johnson Matthey said it expected the metal to trade between $180 and $280 an ounce.

"Its movement will be largely dictated by investor interest," it said.

The palladium market remained in a surplus of 460 000 ounces during 2008, while demand rose by 15 000 ounces to 6.85 million ounces.

However, the report also suggested the global economic crisis would see overall demand for the metal fall in 2009 – particularly in the autocatalyst and industrial sectors – although physical investment and jewellery demand might increase.

"Johnson Matthey forecasts that sales will again be sufficient to keep the palladium market in surplus.

"Investor behaviour will be key to the performance of the palladium price: any rise in commodity investment could see palladium trade as high as $280 within the next six months"

Without this investor interest, palladium could trade as low as $180 within the same period, the report added.

Johnson Matthey's data showed gross autocatalyst palladium demand dropped by 3.6 percent, to 4.38 million ounces, in 2008.

In North America, the main market, sales of the metal declined by over 20 percent, to 1.35 million ounces, with activity badly affected by a sharp fall in light-duty vehicle production.

"However, this was countered by a marked increase in the use of palladium/platinum catalysts for diesel vehicles in Europe, where tougher emissions restrictions are in place."

This pushed total demand for palladium up by 30 000 ounces, to 950 000 ounces, while autocatalyst demand also increased in China, Japan and the "rest of the world" category, Johnson Matthey said.

Sapa