Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — Investor Presentation (November 2003)
39 slides from Johnson Matthey's investor presentation, Nov 18, 2003
Slide 1: Platinum 2003 Interim Review
Platinum|2003 Interim Review Johnson Matthey 18th November 2003 www.platinum.matthey.com abcd Welcome to the launch of the Johnson Matthey Platinum 2003 Interim Review. Today we will be presenting our forecasts of supply and demand for platinum and palladium in 2003 and discussing some of the issues
Slide 2: Platinum
Platinum • Demand edges up to 6.59 million oz • Purchases for jewellery in China & Japan drop • Diesel sales drive record autocatalyst demand • Output rises in S. Africa but falls in N. America • Market deficit reduced but remains substantial • Funds contribute to price strength www.platinum.matthey
Slide 3: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,640 3,180 20 www.platinum.matthey.com abcd Examining demand first, the major shift this year has been in the autocatalyst sector. Gross demand (purchases of metal) from auto companies will jump by 20 per cent to a record
Slide 4: European Demand for Platinum in Autocatalysts 1999-2003
European Demand for Platinum in Autocatalysts 1999 - 2003 '000 oz 1,400 1,200 1,000 Gasoline 800 Diesel 600 400 200 0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd A major component of the growth in autocatalyst demand for platinum in 2003 will be the continuing rise in sales of diesel cars
Slide 5: Autocatalyst demand - Japan
Autocatalyst demand - Japan Tokyo HDD retrofit boosts Pt demand www.platinum.matthey.com abcd In Japan, autocatalyst demand for platinum will get a boost from the application, last month, of legislation requiring the retrofitting of catalysts and particulate filters to heavy duty diesel trucks opera
Slide 6: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,640 3,180 20 recovery (570) (650) 14 www.platinum.matthey.com abcd Recovery of platinum from recycled autocatalysts is expected to climb to 650,000 oz. Much of the increase will be in Europe, where the recycling infrastr
Slide 7: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,640 3,180 20 recovery (570) (650) 14 Jewellery 2,820 2,450 (13) www.platinum.matthey.com abcd Offsetting a large part of the rise in autocatalyst demand is a 13 per cent decline in jewellery demand. We are forecasting th
Slide 8: Demand for Platinum in Jewellery 1999-2003
Demand for Platinum in Jewellery 1999 - 2003 million oz 3.0 2.5 2.0 China 1.5 1.0 0.5 0.0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd Chinese demand for platinum used in jewellery will drop for the first time since the market began to develop in the mid 1990s. We expect demand to fall by
Slide 9: SGE: growth in platinum trade Aug-Nov 2003
SGE: growth in platinum trade 11 Aug – 14 Nov 2003 Kg 6,000 5,000 4,000 3,000 2,000 1,000 0 N 3 6 1 8 2 0 13 20 27 11 18 25 15 29 p2 -1 ov ct p p ct ct ct p p ug ug ug Se Se ov O Se N Se Se O O O A A A www.platinum.matthey.com abcd A positive development for the platinum jewellery trade in China, ho
Slide 10: Demand for Platinum in Jewellery 1999-2003
Demand for Platinum in Jewellery 1999 - 2003 million oz 3.0 2.5 2.0 Japan 1.5 China 1.0 0.5 0.0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd Japanese demand for platinum in jewellery will also drop in 2003 – we expect a fall of 15 per cent to 665,000 oz, approximately half the level of dem
Slide 11: Demand for Platinum in Jewellery 1998-2002
Demand for Platinum in Jewellery 1998 - 2002 million oz 3.0 2.5 Europe etc 2.0 N. America Japan 1.5 China 1.0 0.5 0.0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd We do not expect much change in the level of demand in other jewellery markets. North American consumers have been fairly cauti
Slide 12: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,640 3,180 20 recovery (570) (650) 14 Jewellery 2,820 2,450 (13) Industrial 1,590 1,600 1 Investment 80 10 (88) TOTAL DEMAND 6,560 6,590 0.5 www.platinum.matthey.com abcd Industrial demand for platinum is forecast to be v
Slide 13: Platinum Supply by Region
Platinum Supply by Region ‘000 oz 2002 2003 % change South Africa 4,450 4,650 4.5 www.platinum.matthey.com abcd South African output will again lead growth in the supply of platinum in 2003, rising by 4.5 per cent to 4.65 million oz. 13
Slide 14: Expanding South African Supply
Expanding South African Supply million oz 5 4 3 2 1 0 1999 2000 2001 2002 2003 Anglo Platinum Impala Lonmin Others www.platinum.matthey.com abcd South African mines are currently expanding. We can look at this in more detail: Anglo Platinum expects to refine 2.3 million ounces in 2003. That is a 2 p
Slide 15: Platinum Supply by Region
Platinum Supply by Region ‘000 oz 2002 2003 % change South Africa 4,450 4,650 4.5 Russia 980 950 (3) Others 540 510 (5.5) TOTAL SUPPLY 5,970 6,110 2 www.platinum.matthey.com abcd Russian shipments of platinum are projected to slip to 950,000 oz, more in line with production, although our forecast al
Slide 16: Platinum Supply and Demand
Platinum Supply and Demand ‘000 oz 2002 2003 % change Demand 6,560 6,590 0.5 Supply 5,970 6,110 2 Movements in Stocks (590) (480) www.platinum.matthey.com abcd Even though supplies will increase at a faster rate than demand this year, we predict that they will fall short of demand by 480,000 oz and
Slide 17: Platinum Price
Platinum Price January – October 2003 $ per oz 800 750 700 650 600 550 J F M A M J J A S O Platinum - Av. London fix www.platinum.matthey.com abcd The continuing tightness in the physical market has underpinned the platinum price during 2003. The price rallied from $600 at the start of the year to o
Slide 18: Platinum - NYMEX speculative longs versus price
Platinum – NYMEX speculative longs versus price, Jan – Oct 2003 ’000 oz $ per oz 500 760 740 400 720 700 300 680 660 200 640 100 620 600 0 580 07- 04- 04- 01- 29- 27- 24- 22- 19- 16- 14- Jan Feb Mar Apr Apr May Jun Jul Aug Sep Oct Net speculative position 5-day moving av. price www.platinum.matthey.
Slide 19: Palladium
Palladium • Demand recovers to 5.65 million oz • Much less use of inventories by auto companies • Stocks no longer affecting electronics sector • Russian sales rebound to 2.95 million oz • Surplus continues to grow www.platinum.matthey.com abcd Palladium demand is expected to recover to 5.65 million
Slide 20: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,090 3,670 19 www.platinum.matthey.com abcd The autocatalyst sector is the prime mover of demand for palladium this year, with demand forecast to surge by 19 per cent to 3.67 million oz. 20
Slide 21: Palladium Autocatalyst Demand 1999-2003
Palladium Autocatalyst Demand 1999 - 2003 million oz 7 6 5 Purchases 4 Use 3 2 1 0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd This is, however, well below the peak demand of recent years. The dark blue bars on this chart indicate our estimates of purchases of palladium by the auto indust
Slide 22: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,090 3,670 19 recovery (370) (410) 11 Electronics 750 985 31 www.platinum.matthey.com abcd The volume of palladium recovered from recycled autocatalysts is projected to increase by 11 per cent to 410,000 oz in 2003, driv
Slide 23: Palladium Demand by Application: Electronics
Palladium Demand by Application Electronics • Thrifting • Miniaturisation • Substitution www.platinum.matthey.com abcd Manufacturers of both multi-layer ceramic capacitors and hybrid integrated circuits have reduced the amount of palladium per component; Miniaturisation is a continuing trend that is
Slide 24: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,090 3,670 19 recovery (370) (410) 11 Electronics 750 985 31 Dental and Other 1,380 1,405 2 TOTAL DEMAND 4,850 5,650 16.5 www.platinum.matthey.com abcd The fall in the price of palladium, coupled with the rise in the pri
Slide 25: Palladium Supply by Region
Palladium Supply by Region ‘000 oz 2002 2003 % change Russia 1,930 2,950 53 www.platinum.matthey.com abcd Supplies, however, are also going to rise substantially in 2003. Russian sales of the metal are forecast to jump by 53 per cent to 2.95 million oz. Norilsk Nickel held back from the spot market
Slide 26: Russian Palladium Sales 1999-2003
Russian Palladium Sales 1999 - 2003 million oz 6 5 4 Russian sales 3 Mine output 2 1 0 1999 2000 2001 2002 2003 www.platinum.matthey.com abcd This chart shows the pattern of Russian palladium sales over the last five years: substantial sales from central government stocks between 1999 and 2001, Nori
Slide 27: Palladium Supply by Region
Palladium Supply by Region ‘000 oz 2002 2003 % change Russia 1,930 2,950 53 South Africa 2,160 2,280 5.5 North America 990 850 (14) Others 170 240 41 TOTAL SUPPLY 5,250 6,320 20 www.platinum.matthey.com abcd In South Africa, palladium output will rise slightly faster than platinum production as new
Slide 28: Palladium Supply and Demand
Palladium Supply and Demand ‘000 oz 2002 2003 % change Demand 4,850 5,650 16.5 Supply 5,250 6,320 20 Movements in Stocks 400 670 www.platinum.matthey.com abcd Although demand for palladium is recovering, supply is growing even more rapidly and the surplus is set to widen to 670,000 oz. 28
Slide 29: Palladium Price
Palladium Price January – October 2003 $ per oz 300 250 200 150 100 J F M A M J J A S O Palladium - Av. London fix www.platinum.matthey.com abcd With the market fundamentals weak, the palladium price dropped from around $250 in January this year to a low of $144 in April. As with platinum, however,
Slide 30: Palladium - NYMEX speculative longs versus price
Palladium – NYMEX speculative longs versus price, Jan – Oct 2003 ’000 oz $ per oz 500 280 260 400 240 220 300 200 180 200 160 100 140 120 0 100 07- 04- 04- 01- 29- 27- 24- 22- 19- 16- 14- Jan Feb Mar Apr Apr May Jun Jul Aug Sep Oct Net speculative position 5-day moving av. price www.platinum.matthey
Slide 31: Key Issues
Key Issues • Auto industry – diesel car sales – emissions legislation – HDD retrofitting – changing pgm ratios & thrifting www.platinum.matthey.com abcd In the auto industry, diesel car sales are almost certainly going to drive further growth in demand for platinum in Europe as the market share of d
Slide 32: Key Issues
Key Issues • Auto industry • Chinese jewellery demand • South African mine expansions – PGM prices versus rand strength www.platinum.matthey.com abcd The main influence on the level of Chinese jewellery demand for platinum will continue to be the profit margins available to manufacturers, which in t
Slide 33: Monthly average rand:$ rate
Monthly average rand:$ rate Jan 2000 – Sept 2003 rand:$ 12 11 10 9 8 7 6 2000 2001 2002 2003 Average $:rand exchange rate www.platinum.matthey.com abcd The Rand : dollar exchange rate has been volatile during the last four years, as demonstrated by this chart. A weak Rand has been strongly supportiv
Slide 34: Indexed average PGM Basket Price
Indexed average PGM Basket Price Jan 2000 – Sept 2003 rand:$ 12 120 11 110 10 100 9 90 8 80 7 70 6 60 2000 2001 2002 2003 Average indexed rand basket price - total all current mines Average rand:$ exchange rate www.platinum.matthey.com abcd The Rand this year has been a little weaker against the dol
Slide 35: Indexed average PGM Basket Price
Indexed average PGM Basket Price Jan 2000 – Sept 2003 rand:$ 12 120 11 110 10 100 9 90 8 80 7 70 6 60 2000 2001 2002 2003 Average indexed rand basket price - total all current mines Average indexed rand basket price - UG2, central E. Bvd Average rand:$ exchange rate www.platinum.matthey.com abcd Thi
Slide 36: Key Issues
Key Issues • Auto industry • Chinese jewellery demand • South African mine expansions – PGM prices versus Rand strength & inflation – Legislative programme www.platinum.matthey.com abcd The outlook in South Africa is further complicated by mining legislation, with the proposed royalty bill in partic
Slide 37: Key Issues
Key Issues • Auto industry • Chinese jewellery demand • South African mine expansions • Palladium stocks • Fund activity www.platinum.matthey.com abcd Stocks of palladium are still held by the Russian government, as well as by Stillwater Mining in the USA, and any substantial disposal of metal from
Slide 38: Forecast Prices For The Next 6 Months
Forecast Prices For The $ per oz Next 6 Months 900 800 $700 – $820 700 600 500 400 300 200 100 0 J F M A M J J A S O N D J F M A Platinum www.platinum.matthey.com abcd So, with all that in mind, what does Johnson Matthey forecast for platinum and palladium prices over the next six months? We believe
Slide 39: Forecast Prices For The Next 6 Months
Forecast Prices For The $ per oz Next 6 Months 900 800 $700 – $820 700 600 500 400 300 200 $140 – $220 100 0 J F M A M J J A S O N D J F M A Platinum Palladium www.platinum.matthey.com abcd For palladium, the fundamentals are likely to remain weak. The continuation of the current oversupply should p
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