Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — Investor Presentation (May 2004)
44 slides from Johnson Matthey's investor presentation, May 17, 2004
Slide 1: Platinum 2004
Platinum|2004 Johnson Matthey 17th May 2004 www.platinum.matthey.com Good morning & welcome . Firstly, a review of the platinum market… 1
Slide 2: Platinum
Platinum • Demand edges up to 6.52 million oz • Sustained by rising auto industry purchases • But purchases for jewellery in China & Japan drop • Output from South Africa and Zimbabwe climbs • Market deficit shrinks to 280,000 oz • Funds contribute to price strength www.platinum.matthey.com Platinum
Slide 3: Platinum
Platinum • Demand edges up to 6.52 million oz • Sustained by rising auto industry purchases • But purchases for jewellery in China & Japan drop • Output from South Africa and Zimbabwe climbs • Market deficit shrinks to 280,000 oz • Funds contribute to price strength www.platinum.matthey.com Producti
Slide 4: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,590 3,190 23 www.platinum.matthey.com Gross demand (purchases of metal) from auto companies jumped by 600,000 oz (23 per cent) to a record total of 3.19 million oz in 2003. A surge in purchasing by North American car man
Slide 5: 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 European autocatalyst demand for platinum climbed by 11 per cent in 2003, driven by another strong rise in diesel car sales. With th
Slide 6: Autocatalyst demand – Japan
Autocatalyst demand – Japan Tokyo HDD retrofit boosts Pt demand by 18% www.platinum.matthey.com In Japan, autocatalyst demand for platinum received a substantial boost from the introduction of legislation requiring the retrofitting of oxidation catalysts and diesel particulate filters to heavy duty
Slide 7: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,590 3,180 23 recovery (565) (645) 14 Jewellery 2,820 2,440 (13) www.platinum.matthey.com Recovery of platinum from recycled autocatalysts climbed to 645,00 oz in 2003. The greatest increase in the volume of platinum recy
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 Chinese demand for platinum used in jewellery dropped for the first time since the market began to develop rapidly in the mid 1990s, falling by 19 per cent to 1
Slide 9: Retail price of platinum jewellery in Shanghai vs equivalent fixing price
Retail price of platinum jewellery in Shanghai vs equivalent fixing price 300 250 200 150 100 50 0 N 2 N 3 2 3 M 2 M 3 4 2 2 3 3 02 03 04 0 -0 0 -0 -0 -0 -0 l-0 l-0 -0 -0 p- p- n- n- n- ov ov ar ar ar ay ay Ju Ju Se Se Ja Ja Ja M M M Shanghai Retail Price Fixing Price, RMB equiv. www.platinum.matthe
Slide 10: Shanghai Gold Exchange: Weekly platinum trading activity
Shanghai Gold Exchange: Weekly platinum trading activity August 2003 - April 2004 900 1,000 800 950 700 600 900 500 National 850 400 Day $ per kg Holiday Chinese 300 New 800 oz Year 200 750 100 0 700 /0 03 /0 03 /1 03 /1 03 /1 03 /1 03 /0 03 /0 04 /0 04 /0 04 /0 04 /0 04 /0 04 04 20 20 20 20 20 20 2
Slide 11: 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 Japanese demand for platinum in jewellery also dropped in 2003, falling by 15 per cent to 665,000 oz, approximately half the level of demand four years ag
Slide 12: 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 There was little overall change overall in the European and North American platinum jewellery markets in 2003. North American demand
Slide 13: Platinum Demand by Application
Platinum Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 2,590 3,180 23 recovery (565) (645) 14 Jewellery 2,820 2,440 (13) Industrial 1,545 1,520 (2) Investment 80 15 (81) TOTAL DEMAND 6,470 6,520 1 www.platinum.matthey.com Industrial demand for platinum slipped by just less tha
Slide 14: Platinum Supply by Region
Platinum Supply by Region ‘000 oz 2002 2003 % change South Africa 4,450 4,670 5 www.platinum.matthey.com South African output again led growth in the supply of platinum in 2003, rising by 5 per cent to 4.67 million oz. 14
Slide 15: 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 Breaking South African production down in more detail: Anglo Platinum produced 2.3 million oz of refined platinum, a 2 per cent increase on the year before but
Slide 16: Platinum Supply by Region
Platinum Supply by Region ‘000 oz 2002 2003 % change South Africa 4,450 4,670 5 Russia 980 1,050 7 Others 540 520 (4) TOTAL SUPPLY 5,970 6,240 4.5 www.platinum.matthey.com Russian shipments of platinum rose by 7 per cent in 2003 to 1.05 million oz. Mine production was estimated to have totalled 880,
Slide 17: Platinum Supply and Demand
Platinum Supply and Demand ‘000 oz 2002 2003 % change Demand 6,470 6,520 0.8 Supply 5,970 6,240 4.5 Movements in Stocks (500) (280) www.platinum.matthey.com With supplies increasing at a faster rate than demand last year, the market deficit narrowed to 280,000 oz. 17
Slide 18: Platinum Price
Platinum Price January – December 2003 $ per oz 850 800 750 700 650 600 550 J F M A M J J A S O N D Platinum: London am fix www.platinum.matthey.com The continuing tightness in the physical market underpinned the platinum price during 2003, but speculative money had a greater effect on the metal’s p
Slide 19: Platinum – NYMEX speculative position versus price
Platinum – NYMEX speculative position versus price Jan 2003 - April 2004 550 950 500 Total Net Spec. Average Price 900 450 400 850 350 800 300 $ per 000 oz 750 250 oz 200 700 150 650 100 50 600 0 550 02 03 03 03 03 03 03 04 04 20 20 20 20 20 20 20 20 20 2/ 2/ 4/ 6/ 8/ 0/ 2/ 2/ 4/ /1 /0 /0 /0 /0 /1 /
Slide 20: Palladium
Palladium • Demand improves to 5.26 million oz • Far less use of inventories by auto companies • Stocks no longer affect purchases for electronics • Dental alloy demand falls further • Russian sales rebound to 2.95 million oz • Market surplus widens substantially www.platinum.matthey.com Palladium d
Slide 21: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,050 3,460 13 www.platinum.matthey.com Looking first at the autocatalyst market in more detail, demand recovered by 13 per cent to 3.46 million oz as US automakers used much less metal from inventories than they had done
Slide 22: Palladium Autocatalyst Demand
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 The dark blue bars show purchases of palladium metal by the auto industry over the last five years and reflect the effects of stock building by auto companies in the l
Slide 23: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,050 3,460 13 recovery (370) (410) 11 Electronics 760 895 18 www.platinum.matthey.com The volume of palladium recovered from recycled autocatalysts increased by 11 per cent to 410,000 oz in 2003, driven by rising recycli
Slide 24: Palladium Demand by Application
Palladium Demand by Application ‘000 oz 2002 2003 % change Autocatalyst: gross 3,050 3,460 13 recovery (370) (410) 11 Electronics 760 895 18 Dental and Other 1,390 1,315 (5) TOTAL DEMAND 4,830 5,260 9 www.platinum.matthey.com The fall in the price of palladium, coupled with the rise in the price of
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 Palladium supply: Russian sales of palladium jumped by 53 per cent to 2.95 million oz in 2003. Norilsk Nickel held back from the spot market in 2002 in an effort to support the palladium price (assis
Slide 26: Russian Palladium Sales
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 This graph shows the pattern of Russian palladium sales over the last five years: substantial sales from central government stocks between 1999 and 2001, the suspe
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 2,310 7 North America 990 940 (5) Others 170 250 47 TOTAL SUPPLY 5,250 6,450 23 www.platinum.matthey.com In South Africa, palladium output increased in line with rising platinum production in 2003. In Nort
Slide 28: Palladium Supply and Demand
Palladium Supply and Demand ‘000 oz 2002 2003 % change Demand 4,830 5,260 9 Supply 5,250 6,450 23 Movements in Stocks 420 1,190 www.platinum.matthey.com So with demand recovering but supply growing even more rapidly, the surplus widened to a massive 1.19 million oz. 28
Slide 29: Palladium Price January – December 2003
Palladium Price January – December 2003 $ per oz 300 250 200 150 100 J F M A M J J A S O N D Palladium: London am fix www.platinum.matthey.com With the market fundamentals weak, the palladium price dropped from around $250 in January 2003 to a low of $144 in April. As with platinum, however, fund ac
Slide 30: Palladium – NYMEX speculative position versus price
Palladium – NYMEX speculative position versus price Jan 2003 - April 2004 1,350 350 1,200 Total Net Spec. Average Price 1,050 300 900 750 250 $ per 000 oz 600 oz 450 200 300 150 150 0 -150 100 02 03 03 03 03 03 03 04 04 2/ 2/ 4/ 6/ 8/ 0/ 2/ 2/ 4/ /1 /0 /0 /0 /0 /1 /1 /0 /0 31 28 30 30 31 31 31 29 30
Slide 31: Looking Ahead
Looking Ahead • Auto industry – diesel car sales www.platinum.matthey.com Looking ahead, what are some of the key factors that will influence pgm supply and demand over the next six to twelve months? Firstly, in the auto industry, diesel car sales are set to continue to grow rapidly and will take fu
Slide 32: Growth of diesel car penetration in Europe, 1996 - 2003
Growth of diesel car penetration in Europe, 1996 - 2003 60 50 40 % 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 www.platinum.matthey.com This chart shows the rise in diesel car market share in Europe since 1996 – climbing from just over 22 per cent that year to well over 43 per cent in 2003. D
Slide 33: Looking Ahead
Looking Ahead • Auto industry – diesel car sales – emissions legislation www.platinum.matthey.com Emissions legislation continues to tighten, both in the mature car markets of Europe, North America and Japan, as well as in rapidly developing markets such as China and India. This will continue to hav
Slide 34: Evolution of European Vehicle Emissions Legislation
Evolution of European Vehicle Emissions Legislation 0.6 0.5 Euro I 0.4 Euro II HC g/km Euro III 0.3 Euro IV 0.2 Euro V Euro VI 0.1 0 0 0.1 0.2 0.3 0.4 0.5 NOx g/km www.platinum.matthey.com This slide illustrates just how much vehicle emissions standards have tightened for nitrous oxides and hydrocar
Slide 35: Looking Ahead
Looking Ahead • Auto industry – diesel car sales – emissions legislation – changing pgm ratios & thrifting www.platinum.matthey.com Thirdly, given the price differential that now exists between platinum and palladium, there will be a degree of switching in favour of the latter on gasoline vehicle au
Slide 36: Looking Ahead
Looking Ahead • Auto industry • Chinese jewellery demand • South African mine expansions – Profitability www.platinum.matthey.com Chinese jewellery demand for platinum may fall for the second year in succession in 2004, but much depends on how jewellery manufacturers and retailers respond to movemen
Slide 37: Looking Ahead
Looking Ahead • Auto industry • Chinese jewellery demand • South African mine expansions – Profitability – Legislative programme www.platinum.matthey.com In addition, the outlook in South Africa is further complicated by the ongoing legislative programme, with the proposed royalty bill (4 per cent o
Slide 38: Looking Ahead
Looking Ahead • Auto industry • Chinese jewellery demand • South African mine expansions • Palladium stocks • Fund activity www.platinum.matthey.com Although purchases of palladium from the auto industry are forecast to improve further in 2004, at the same time approximately 400,000 oz of palladium
Slide 39: Forecast Platinum Price For The Next 6 Months
Forecast Platinum Price For The Next 6 Months $ per oz 1,000 950 900 850 $780 – $920 800 750 700 J F M A M J J A S O www.platinum.matthey.com Our forecast of the trading range for platinum for the next six months was set in the second half of April 2004, just as the price was reaching its peak. At t
Slide 40: Forecast Platinum Price For The Next 6 Months
Forecast Platinum Price For The Next 6 Months $ per oz 1,000 950 900 850 $780 – $920 800 750 700 J F M A M J J A S O www.platinum.matthey.com This assessment subsequently proved correct – the speculative long liquidation of futures positions during the fourth week of April caused a sharp correction
Slide 41: Forecast Palladium Price For The Next 6 Months
Forecast Palladium Price For The Next 6 Months $ per oz 400 350 300 $200 – $340 250 200 150 100 J F M A M J J A S O www.platinum.matthey.com Similarly for palladium, when our forecast was set, the price was near its recent peak of $333, supported by fund buying of palladium derivatives… 41
Slide 42: Forecast Palladium Price For The Next 6 Months
Forecast Palladium Price For The Next 6 Months $ per oz 400 350 300 $200 – $340 250 200 150 100 J F M A M J J A S O www.platinum.matthey.com The late April fund long liquidation resulted in a correction below $250 but a substantial long speculative position in the metal remains. In light of this, an
Slide 43: Conclusion - Platinum
Conclusion - Platinum • Market to move closer to balance in 2004 • Fundamentals remain strong www.platinum.matthey.com In conclusion, the platinum market is expected to move close to balance in 2004, but the demand fundamentals remain good. 43
Slide 44: Conclusion - Palladium
Conclusion - Palladium • Auto industry purchases to improve but thrifting continues • Supplies to rise significantly; market to remain in substantial surplus www.platinum.matthey.com In the palladium market, auto industry purchases are forecast to improve for the second year running in 2004 but much