Platinum Futures in Tokyo Tumble by Limit on Car Demand Concern

By Aya Takada

Aug. 4 (Bloomberg) -- Platinum futures in Tokyo plunged by the daily trading limit to the lowest in more than six months on concern slowing car sales may cut demand for the metal used in auto-emission control devices.

Prices fell by 5.1 percent to the lowest since Jan. 31. U.S. auto sales tumbled 13 percent in July as General Motors Corp., Ford Motor Co. and Toyota Motor Corp. posted declines on lower demand for fuel-thirsty trucks. Demand from the car industry represented 60 percent of global platinum consumption last year, according to U.K. refiner Johnson Matthey Plc.

``A sharp drop in U.S. car sales heightened concern that demand for platinum from the auto industry may shrink, prompting investors to cut holdings of platinum futures,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone.

Platinum for June delivery was down the 300 yen limit at 5,567 yen a gram ($1,610 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract lost 25 percent from a record high of 7,427 yen March 6.

Platinum for immediate delivery fell 0.7 percent to $1,645 an ounce at 12:07 p.m. Tokyo time. Palladium for immediate delivery dropped 1.4 percent to $363.75 an ounce.

Demand for platinum in car catalysts rose 8.2 percent to 4.23 million ounces in 2007, according to the Web site of Johnson Matthey. If demand from the car industry contracts this year, it would be the first drop since 1999, the Web site said.

Car Sales

Sales of cars and light trucks fell 29 percent in July at Chrysler LLC, 26 percent at GM, 15 percent at Ford, 12 percent at Toyota and 1.6 percent at Honda Motor Co., the companies said Aug. 1. Nissan Motor Co. was the only major automaker with a gain, reporting an 8.5 percent increase from a year earlier.

GM, Ford and Chrysler rely more on trucks than Asia-based competitors such as Honda and Nissan, and have led a nine-month industry sales slide. Automakers have been unable to meet demand for fuel-efficient cars as $4-a-gallon gasoline and a 1.9 percent second-quarter economic growth rate pinched consumers.

A shift in consumer demand to fuel-efficient compact cars is negative for platinum demand, as a smaller car uses less platinum in emission-control devices, Saito said.

``Platinum use in a compact car is only one-third or one- fourth of the volume of the metal used for trucks,'' he added.

The U.S. industry's annualized selling rate for July was 12.6 million vehicles, the lowest since April 1992, according to Autodata. Full-year sales in 2007 were 16.1 million.

Deutsche Bank said July 23 that full-year auto sales may fall to 14 million this year, the lowest in 15 years. First-half U.S. sales tumbled 10 percent to 7.41 million.

Platinum for immediate delivery tumbled 15 percent in July because of slumping car sales. The metal reached a record $2,301.50 in March, partly because of output cuts in South Africa. Still, in May the country's metal output, excluding gold, rose at a 2.6 percent annual pace, according to Statistics South Africa.

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