Platinum Futures in Tokyo Advance on Supply Outlook, Weak Yen

By Aya Takada

Aug. 7 (Bloomberg) -- Platinum futures in Tokyo gained for a second day as a weak Japanese currency against the dollar raised the appeal of yen-denominated contracts and after Xstrata Plc forecast a supply shortage of the metal this year.

Futures gained as much as 2 percent, rebounding from a six- month low of 5,305 yen set on Aug. 5. The yen fell to the lowest in almost seven months against the dollar yesterday. Platinum supplies will fall short of consumption by about 500,000 ounces this year because of increased demand from makers of auto catalysts, Xstrata said in a statement yesterday.

``Fundamentals of platinum are not bad as use of the metal in industrial applications is rising,'' Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo, said today by phone.

Platinum for June delivery, the most-active contract, added 0.3 percent to 5,562 yen a gram ($1,582 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Prices have fallen 25 percent from a record 7,427 yen March 6 on concern slowing car sales may prompt automakers to cut purchases of the metal for pollution-control devices.

Platinum for immediate delivery lost 0.5 percent to $1,596.5 an ounce at 11:15 a.m. Tokyo time. Palladium for immediate delivery fell 0.3 percent to $353 an ounce.

Physical buying of platinum waned after prices rebounded from a six-month low of $1,527 an ounce set on Aug. 5, Sugata said. Japanese end-users also slowed metal purchases ahead of the summer holidays next week, he added.

Power Shortages

Spot platinum reached a record $2,301.50 in March as power shortages in South Africa led to a drop in output in the world's largest producer of the metal.

Global platinum supplies fell short of consumption by 480,000 ounces last year, the largest deficit since 2002, as demand of the metal in car catalysts rose 8.2 percent, according to U.K. refiner Johnson Matthey Plc.

Demand from the car industry rose to 4.23 million ounces last year, representing 60 percent of global platinum consumption, according to Johnson Matthey. U.S. auto sales tumbled 13 percent in July on lower demand for fuel-thirsty trucks, increasing speculation catalyst demand may shrink.

If demand from the car industry contracts this year, it would be the first drop since 1999, according to Johnson Matthey.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net