High times for platinum price: A delay in fresh investment signals a strong market, reports Peter Rodgers

SOUTH African platinum mines are unlikely to begin a new investment programme before the next century, because of an overhang of problems from a recent big investment drive, according to the metals group Johnson Matthey.

The delay in the next phase of investment, which has nothing to do with the change of government in South Africa, will help to support the platinum price, which the company believes is on a rising trend.

Keith Green, operations director, said the result of the election nevertheless removed some of the political uncertainty hanging over the platinum price. 'The election has gone so well that the threat of serious disruption has probably receded somewhat.'

The company's annual platinum review, printed before the election and published this morning, says the price is expected to rise no further than dollars 430 an ounce this year - provided there is no serious unrest.

Mr Green said the last big platinum mine investment programme in South Africa - which produces 80 per cent of world supplies - disappointed mining firms because production started later than expected and metal sale prices were lower than forecast.

After a 15 per cent surge of output worldwide last year, new production from the South African programme is now largely on stream and output growth is expected to tail off.

Jeremy Coombes, Johnson Matthey's general manager for marketing, said the mines would want to consolidate for a number of years to build up their financial strength. He did not expect the change of government to have an impact on investment, 'if you can believe what the African National Congress has been saying for the last six months or so.' The ANC's stance was increasingly moderate and in favour of the mixed economy.

The annual review said demand was rising, helped by the buoyancy of the motor industry, where demand for platinum as a catalyst for cleaning up exhaust emissions has been rising sharply with vehicle output. Growth in catalyst demand this year is expected to be as strong as in 1993.

Last year overall demand for platinum rose 6 per cent as both car and jewellery use rose to record levels. But with the rise in supplies, the price was supported by speculation - encouraged by similar buying in the gold market - and by fears of supply disruption.

The review said the average price expected this year was above dollars 400 an ounce. Even if the threat of supply disruption recedes, rising demand and continued speculative buying should give solid support to the price at around dollars 380, the company said.