Platinum producers not too keen on ETF

By Justin Brown

Johannesburg - The world's largest platinum producers yesterday gave the thumbs down to talk of an exchange-traded fund (ETF) due to the low liquidity in the platinum market and fears that an ETF could overheat an already tight global market for platinum.

Over the past two years, investors have poured $10 billion (R72 billion) into gold ETFs, including the ETF listed on the JSE.

There is also a silver ETF listed in the US.

Anglo Platinum's commercial director, Sandy Wood, said the group was not keen for there to be an ETF launched and such a vehicle would cause platinum stock to be locked up.

For every ounce of ETF metal bought, there needs to be an equal amount of metal stored in a vault.

The storing of platinum, off the market, would cause upward pressure on the price of platinum in an already tight global platinum market, said Wood.

Impala Platinum's marketing director, Derek Engelbrecht, said the key issue related to a platinum ETF was the lack of liquidity in the platinum market, which was much less than the markets for gold and silver.

"We would probably be against an ETF," said Engelbrecht.

A platinum EFT may not make it to listing in the US, due to strong lobbying against a listing.

Engelbrecht said such a listing could take place in Europe.

About one-third of market players that were canvassed by Engelbrecht had been in favour of an ETF, while two-thirds were against the ETF.

The key market participants who were in favour of an ETF were the funds, he added.

UK company Johnson Matthey forecast that the world market for platinum would be in deficit by 20 000 ounces in 2006 from 40 000 ounces the previous year.

Johnson Matthey's general manager of research, Tom Kendall, said overground stocks of platinum were hard to estimate, but were likely to be in the hundreds of thousands of ounces.

The extent of platinum stocks available was reflected by platinum lease rates, which were between 4 percent and 5 percent, which compared with palladium lease rates of zero, due to the million ounces of ounces of palladium stock.

The launch of the gold and silver ETFs resulted in a tremendous increase in investor interest in both metals.

Wood said a platinum ETF was not in the interest of platinum producers and the major consumers of the metal, which include the world's largest vehicle producers.

Platinum is mainly used in vehicle catalysts and jewellery.

Kendall said prior to the listing of the silver ETF there was resistance from the silver users' association, but the listing still went ahead.

A US listing of the platinum ETF was less likely due to the regulatory hurdles.

But a European listing of the ETF was likely to be in Zurich and London.

"The natural home for the ETF would be London," Kendall said.