Platinum Futures Drop Amid Signs Auto Catalyst Demand to Slump

By Dave McCombs

July 16 (Bloomberg) -- Platinum futures in Tokyo dropped to a 10-week low on speculation declining sales at automakers including Toyota Motor Corp. will cut demand for the metal in exhaust filters.

The most-active contract for platinum plunged after public broadcaster NHK reported Toyota will cut this year's global sales target by 350,000 vehicles to 9.5 million. General Motors Corp., Toyota's only bigger rival, yesterday suspended its dividend and said it will sell assets to raise cash as weak sales slash profit.

``There is nothing new about limits on production in South Africa, so the weak picture for U.S. auto demand is dragging down platinum,'' Wakako Harada, a trader at Mitsubishi Corp. in Tokyo, said today by phone. The decline in platinum for immediate delivery may lure physical buyers, she said.

Platinum for June delivery plunged as much as 297 yen, or 4.4 percent, to 6,418 yen a gram ($1,912 an ounce), the lowest since May 8. It traded at 6,433 yen at 3 p.m. on the Tokyo Commodity Exchange.

Metal for immediate delivery dropped as much as $41 to $1,938.50 an ounce, 2.1 percent lower than yesterday in New York, and the lowest since July 8. It traded at $1,950.50 an ounce at 2:57 p.m., Tokyo time.

Car and light-truck manufacturers worldwide account for more than 60 percent of platinum demand, according to estimates by Johnson Matthey Plc, which makes about one-third of the world's auto catalysts.

Demand from physical buyers of the metal increases whenever the price falls below $1,950 an ounce, Harada said.

Platinum's 5.7 percent decline so far this month has trimmed its annual gain to 28 percent. The metal climbed to a record high in March, partly on expectations a power shortage in South Africa, which accounts for about 78 percent of global supply, would restrict mining.

Wage disputes and fatal accidents also restricted mining in the country, prompting speculation output will fail to meet rising demand for the metal to make cars and trucks.

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net