Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — Investor Presentation (May 2005)
32 slides from Johnson Matthey's investor presentation, May 16, 2005
Slide 1: Platinum 2005
Platinum 2005 16th May 2005 Mike Steel, Market Research Director. Good morning, ladies and gentlemen. First of all I would like to say that it is always a great pleasure to see you here. Welcome to Platinum 2005 and to London Platinum Week! This year’s presentation will be a similar format to last y
Slide 2: Platinum Demand +1%
Platinum Demand + 1% million oz 7 • Demand edged up to a new 6 high of 6.58 million oz 5 • Strong growth from 4 autocatalyst sector and 3 industrial applications 2 • Purchases for jewellery 1 manufacture dropped by 0 12 per cent 2003 2004 Demand www.platinum.matthey.com Turning first to demand for p
Slide 3: Platinum Supply +5%
Platinum Supply + 5% million oz 7 • Supplies grew more 6 rapidly than demand, reaching 6.5 million oz 5 4 • Market moved close to balance 3 2 • Price was supported by fund investment, as well as 1 by physical demand 0 2003 2004 Demand Supply www.platinum.matthey.com Let us now look at the supply sid
Slide 4: Platinum Demand by Application: Autocatalyst
Platinum Demand by Application Autocatalyst: +7% 4,000 3,510 3,500 3,270 RoW 3,000 '000 oz 2,500 N.America 2,000 Japan 1,500 1,000 Europe 500 0 2003 2004 www.platinum.matthey.com Now we can go into a little bit more detail about individual applications. First of all, we'll look at the largest one, a
Slide 5: European Demand for Platinum in Autocatalysts 1999-2004
European Demand for Platinum in Autocatalysts 1999-2004 1,750 55 1,500 50 1,250 45 1,000 40 '000 oz % 750 35 500 30 250 25 0 20 1999 2000 2001 2002 2003 2004 Pt in Gasoline Pt in Diesel LDD market share www.platinum.matthey.com I want to say a little bit more about Europe because it is such an impor
Slide 6: Autocatalyst Demand for Platinum: Other Markets
Autocatalyst Demand for Platinum: Other Markets Japan: up 18% to 590,000 oz • Truck manufacturers introduce models with catalysts & particulate filters as standard equipment North America: down 10% to 800,000 oz • Substitution by palladium in gasoline autocatalysts Rest of the World: up 7% to 460,00
Slide 7: Platinum Demand by Application: Jewellery
Platinum Demand by Application Jewellery: -12% 2,800 2,510 2,400 2,200 RoW 2,000 '000 oz 1,600 Europe 1,200 N.America 800 Japan 400 China 0 2003 2004 www.platinum.matthey.com Autocatalyst was a positive demand story in 2004. In contrast, the more negative story was that of jewellery, where we saw th
Slide 8: Fall in Chinese Jewellery Demand
Fall in Chinese Jewellery Demand down 19% to 1.01 million oz • Rising platinum price affected manufacturers’ profit margins and metal financing costs • Inventories of platinum jewellery reduced throughout the trade • Many manufacturers began production of more profitable palladium jewellery • Increa
Slide 9: Fall in Chinese Jewellery Demand (retail price)
Fall in Chinese Jewellery Demand 300 Retail Price, Shanghai 280 Average Pt Price } Manufact. 260 Wholesaler RMB per gram 240 Retailer 5% tax 220 200 180 160 A J A O D F A J A O D F A 2003 2004 2005 www.platinum.matthey.com This chart illustrates some of those points I have been making. It shows the
Slide 10: Jewellery Demand for Platinum: Other Markets
Jewellery Demand for Platinum: Other Markets Japan: down 12% to 560,000 oz • Strong competition from white gold • Inventory recycling persists at high rates North America: down 9% to 290,000 oz • High platinum price pressures sales at lower end of US market Europe: up 8% to 205,000 oz • Further grow
Slide 11: Platinum Demand by Application: Industrial
Platinum Demand by Application Industrial: +11% 1,530 1,600 1,380 Petroleum 1,400 1,200 Glass '000 oz 1,000 800 Electrical 600 Chemical 400 200 Other 0 2003 2004 www.platinum.matthey.com Moving on then to the industrial markets, we also saw quite a positive increase in demand. We estimate that the o
Slide 12: Platinum Demand by Application
Platinum Demand by Application ’000 oz 2003 2004 % change Autocatalyst: gross 3,270 3,510 7 recovery (645) (700) 9 Jewellery 2,510 2,200 (12) Industrial 1,380 1,530 11 Investment 15 40 TOTAL DEMAND 6,530 6,580 1 www.platinum.matthey.com This table summarizes demand for platinum in all the different
Slide 13: Platinum Supply by Region
Platinum Supply by Region Total supply: +5% 7 6.50 6.30 6 Other 5 million N. America oz 4 3 Russia 2 1 South Africa 0 2003 2004 www.platinum.matthey.com So, how was this demand satisfied by the supply side? We saw a 5% increase in supplies of platinum last year, with most of that growth coming from
Slide 14: Platinum Supply by Region
Platinum Supply by Region South Africa: up 9% to 5.03 million oz • Output exceeds expectations; higher production from most major producers • Rand strength & other cost pressures cause further revisions to expansion plans Russia: down 19% to 850,000 oz • Sales drop back to reflect mine production No
Slide 15: Platinum Supply and Demand
Platinum Supply and Demand ’000 oz 2003 2004 % Demand 6,530 6,580 +1 Supply 6,200 6,500 +5 Movements in stocks (330) (80) www.platinum.matthey.com So, looking at the overall picture for platinum in 2004, we saw a 1% increase in demand and a 5% increase in supplies. In combination, this led to a narr
Slide 16: Platinum price vs NYMEX net speculative position
Platinum price vs NYMEX net speculative position January 2004 – April 2005 $ per oz '000 oz 950 350 Total Net Spec. Weekly Average Price 925 300 900 250 875 200 850 150 825 100 800 50 775 0 750 -50 J F M A M J J A S O N D J F M A 2004 2005 www.platinum.matthey.com The deficit was one of the reasons
Slide 17: Palladium Demand +22%
Palladium Demand + 22% million oz 8 • Demand jumps to 7 6.6 million oz 6 • Autocatalyst & electronics 5 purchases improve 4 3 • Production of palladium 2 jewellery in China 1 develops rapidly 0 2003 2004 Demand www.platinum.matthey.com Now let us talk about palladium. The most significant thing abou
Slide 18: Palladium Supply +18%
Palladium Supply + 18% million oz 8 • Supplies surge to 7 7.62 million oz 6 • Large sales from Russian 5 stocks; increased mine 4 production elsewhere 3 2 • Market remained heavily in 1 surplus, price weakness 0 persisted 2003 2004 Demand Supply www.platinum.matthey.com Perhaps regrettably as far as
Slide 19: Palladium Demand by Application: Autocatalyst
Palladium Demand by Application Autocatalyst: +10% 4,000 3,810 3,450 3,500 RoW 3,000 '000 oz 2,500 N.America 2,000 Japan 1,500 1,000 Europe 500 0 2003 2004 www.platinum.matthey.com If we now consider the main applications for palladium. Demand for palladium in autocatalysts was 10% up at 3.81 millio
Slide 20: Autocatalyst Demand for Palladium
Autocatalyst Demand for Palladium North America: up 20% to 1.445 million oz • US automakers increased purchases, having run down inventories the previous year Japan: up 23% to 675,000 oz • Palladium demand climbed as substitution of platinum increased, emissions limits tightening Europe: down 5% to
Slide 21: Palladium Demand by Application: Industrial, Jewellery & Other
Palladium Demand by Application Industrial, Jewellery & Other: +39% 4,000 3,500 3,320 3,000 Other '000 oz 2,500 2,380 Jewellery 2,000 1,500 Dental 1,000 Electronics 500 0 2003 2004 www.platinum.matthey.com Just a quick look now at all the other applications for palladium. As I mentioned earlier, the
Slide 22: Jewellery Demand for Palladium
Jewellery Demand for Palladium Purchases climb to 920,000 oz • Chinese manufacturers began mass producing palladium jewellery in Q1 2004 • Strong purchasing of metal in March/April as the jewellery trade stocked up • Sales developed in second & third tier cities • Low metal funding costs an advantag
Slide 23: Palladium Demand by Application
Palladium Demand by Application ’000 oz 2003 2004 % change Autocatalyst: gross 3,450 3,810 10 recovery (410) (530) 29 Electronics 900 955 6 Dental 825 850 3 Jewellery 250 920 368 Other 405 595 47 TOTAL DEMAND 5,420 6,600 22 www.platinum.matthey.com This chart summarizes demand for palladium. One of
Slide 24: Palladium Supply by Region
Palladium Supply by Region Total supply: +18% 7.62 8 7 6.45 Other 6 million 5 N. America oz 4 3 Russia 2 1 South Africa 0 2003 2004 www.platinum.matthey.com On the supply side, the main increase here was in mine production from South Africa and North America. But the most significant change from 200
Slide 25: Palladium Supply by Region
Palladium Supply by Region Russia: up 29% to 3.8 million oz • Norilsk mine production stable • Total includes 375,000 oz of stock sold by Stillwater • Large volume of metal shipped from State inventories South Africa: up 8% to 2.5 million oz • Production increased in line with expanding platinum out
Slide 26: Palladium Supply and Demand
Palladium Supply and Demand ’000 oz 2003 2004 % Demand 5,420 6,600 +22 Supply 6,450 7,620 +18 Movements in stocks 1,030 1,020 www.platinum.matthey.com So, summarizing for palladium in 2004, we saw a 22% increase in demand and an 18% increase in supplies. That still left the market substantially in s
Slide 27: Palladium price vs NYMEX net speculative position
Palladium price vs NYMEX net speculative position January 2004 – April 2005 $ per oz '000 oz 350 1,000 Total Net Spec. Average Price 300 800 250 600 200 400 150 200 100 0 J F M A M J J A S O N D J F M A 2004 2005 www.platinum.matthey.com If we look, as we did for platinum, at what happened to the pa
Slide 28: 2005 Outlook - Platinum
2005 Outlook - Platinum • Diesels to drive further growth in autocatalyst demand • Chinese jewellery market appears resilient, helped by less volatile price • Industrial consumption to remain firm • Rate of growth in supplies depends on South African expansions • Market to remain close to balance ww
Slide 29: Forecast Platinum Price For The Next 6 Months
Forecast Platinum Price For The Next 6 Months $ per oz 1,000 950 900 $830 – $930 850 800 750 700 N D J F M A M J J A S O N 2004 2005 www.platinum.matthey.com www.platinum.matthey.com What does that mean for our forecast of the market price for platinum? The supply/demand fundamentals suggest that th
Slide 30: 2005 Outlook - Palladium
2005 Outlook - Palladium • Total autocatalyst demand unlikely to change • Significant increase in autocatalyst recovery • Direction of Chinese jewellery market unclear • Mine output to expand, sales from stocks to continue • Market surplus expected to persist www.platinum.matthey.com As for the outl
Slide 31: Forecast Palladium Price For The Next 6 Months
Forecast Palladium Price For The Next 6 Months $ per oz 300 250 200 $160 – $230 150 100 N D J F M A M J J A S O N 2004 2005 www.platinum.matthey.com www.platinum.matthey.com So, what is that likely to do for the palladium price? The fact that the market remains in surplus is negative for the price.
Slide 32: Platinum 2005
Platinum 2005 www.platinum.matthey.com Ladies and gentlemen, that concludes today's presentation. Now, I invite you to ask my colleagues as many questions as you like. Thank you. 32