Johnson Matthey share price: Company expects rise in platinum demand

on Dec 17, 2013
Updated: Oct 21, 2019
Listen, Tuesday, December 17: Johnson Matthey (LON:JMAT), the world’s biggest manufacturer of catalytic converters for cars, has estimated that South Africa, China and the EU will drive platinum supply-and-demand fundamentals next year.

Johnson Matthey’s share price yesterday closed 1.14 percent higher at 3,196p
High mining costs in South Africa mean the country’s mines are unlikely to deliver more platinum in the near term, Johnson Matthey’s marketing and publications manager Jeremy Coombes said during a precious metals conference in New York earlier this month. Johnson Matthey had previously predicted that the global platinum deficit will be 605,000 ounces in 2013, up more than 40 percent from last year. The current year will be the third consecutive year of shortfall. Platinum is primarily used in catalytic converters for cars as well as being used for expensive jewellery.

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Platinum has struggled against a downdraft from declining gold prices, which have fallen by a quarter this year. Platinum prices, which usually shadow movements in gold prices, have fallen by about 10 percent this year.
South Africa has provided two-thirds of the global platinum mining output this year, far exceeding Russia and Zimbabwe. With platinum selling for about $1,370 an ounce, South African mines can cover most of their cash costs but adding capital and exploration costs to operating costs make mine expansion unprofitable.

“Companies have tried to conserve cash by not spending as much as maybe they should be on new developments,” said Coombes. “Essentially, South African mining is preserving the short term, possibly at the expense of the long-term ability to produce to meet growing demand.”
The company sees potential for growth in platinum prices in coming years, as the recovery in the car markets of the US and China continues. Johnson Matthey, which has around a third of the global catalytic converter market, has forecast an average platinum price of $1,465 an ounce over the next six months. While supply of the metal from South African is unlikely to grow significantly, platinum demand is steadily rising. New, tighter emissions rules in Europe, set to take effect next year and into 2015, will significantly boost the amount of platinum needed for catalytic converters, said Coombes. China will also play a key role in platinum markets next year with the world’s second-biggest economy increasingly seeking platinum for industrial uses, aside from its already established role as a major consumer of platinum jewellery.

Johnson Matthey opened a €60 million extension to its European plant in Macedonia last month. The new plant in the former Yugoslav republic will provide additional capacity for catalysts to meet a rise in demand from the introduction of tighter emissions legislation in the EU. The extension will bring the plant’s total capacity to around 10 million catalytic converters.

**Analysts on Johnson Matthey**
Last month, Johnson Matthey announced strong first-half results (Johnson Matthey share price rises on strong H1 results).
Research analysts at Deutsche Bank last week reiterated their ‘buy’ rating on Johnson Matthey’s stock with a price target of 3,650p. Analysts at Liberum Capital also reiterated their “buy” rating on the shares with a price objective of 3,500p.
**As of Monday buy Johnson Matthey shares at 3,202p**
**As of Monday sell Johnson Matthey shares at 3,200p**
Trade stocks with Hargreaves Lansdown from £5.95 per deal.
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