Platinum Heads for Second Weekly Drop as Supply Concern Eases

By Rachel Graham

July 25 (Bloomberg) -- Platinum headed for a second straight weekly drop as concern eased that power cuts in South Africa, the largest producer of the metal, would disrupt supply.

Johnson Matthey Plc, which uses platinum in auto catalysts, said May 19 rising power demand in South Africa's winter between May and August may cause disruption, after mines were forced to close in January. State utility Eskom Holdings Ltd. has curbed power to mining companies by as much as 10 percent of normal use.

``We had expected more issues with electricity in South Africa and that hasn't happened,'' Gerry Schubert, a director at Fortis in London, said by phone from London. ``We've seen a lot of long liquidation in platinum.''

Platinum for immediate delivery climbed $22, or 1.3 percent, to $1,739 an ounce as of 12:13 p.m. in London, the first gain in 10 trading sessions. A close at that level would make for a decline of 6.1 percent this week, after a 9 percent drop last week.

The disruption in South Africa in early 2008 reduced the country's platinum output by 200,000 ounces, or 4 percent of its annual mine supply, according to Johnson Matthey. South Africa produced about 78 percent of world platinum supply last year.

Platinum held in London-listed exchange traded funds managed by ETF Securities Ltd. fell by 0.6 percent earlier this week.

Platinum assets slid to 364,759 ounces on July 22 from 367,014 ounces previously, data posted on the company Web site showed. Platinum assets at the company rose to a record 418,247 ounces on July 4.

Daimler, Trucks

Platinum has also fallen on concern that slowing economic growth may curb demand for the metal, used to make vehicle exhaust filters.

Germany's Daimler AG, the world's second-biggest luxury carmaker, said yesterday it plans to reduce production of the Mercedes-Benz E-Class sedan as sales fall. An industry report today said European heavy-truck sales dropped 3.5 percent in June compared with a year earlier.

``Expectations of slowing global demand'' led platinum lower yesterday, James Moore, an analyst at TheBullionDesk.com, wrote today in a report. ``We anticipate strong bargain hunter interest once prices stabilize.''

Among other metals for immediate delivery, gold gained $3.97, or 0.4 percent, to $932.02 an ounce and silver rose 13.5 cents, or 0.8 percent, to $17.565 an ounce. Palladium dropped $2, or 0.5 percent, to $386.75 an ounce.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net