Precious Metals

Precious Metals Division's operating profits were 3% down on last year at £55.9 million.

Trading conditions for the division’s global platinum group metal (pgm) trading and marketing business proved less favourable as prices declined from the exceptional levels of recent years. However, demand for platinum and for fabricated pgm products continued to grow.

Platinum
Platinum and palladium prices fell sharply in the first half of 2001/02 from the highs seen in January 2001. The prospect of a global economic slowdown, the liquidation of long positions held by speculators and, in the case of palladium, a sharp fall in consumer demand, saw prices reach their low points in October. Thereafter the prices of both metals enjoyed a modest recovery as economic sentiment improved in the USA and Russian palladium sales were curtailed.

Although negative market sentiment undermined the price of platinum, the metal’s fundamentals remained strong with demand outstripping supply. Autocatalyst demand increased as the market share of diesel engine cars, which use platinum based catalysts, grew significantly and new tougher legislation came into force in Europe. Although jewellery demand declined in the USA and Japan as consumer spending fell, the market in China once again displayed remarkable growth. Industrial demand grew modestly overall, with increased use in glassmaking, petroleum refining and dental alloys, partly offset by weaker demand for coating computer disks, as manufacturers cut production and inventory levels.

The palladium market moved into surplus during the year, with falling demand from all the main consuming sectors. Auto manufacturers continued to thrift palladium on autocatalysts and to shift back to platinum based catalysts for gasoline engines, while demand from dental alloy producers and electronic component manufacturers was affected by aggressive substitution away from palladium and a slump in demand for electronic goods.

The average price of platinum for the year was $503 per oz, 13% lower than in 2000/01. The average price of palladium was also lower at $473 per oz, down 39% in the same period. This decline in prices and the thin trading conditions experienced for much of the year reduced the profits of the division’s marketing and trading operations from the record levels enjoyed in 2000/01.

Despite the difficult economic climate for our traditional products, profits from the division’s pgm manufacturing activities in the UK and USA increased again this year. Our industry leading metallurgical expertise, combined with our capabilities in precision forming and machining, further strengthened our technological advantage in key sectors. New product introductions were well received by our customers and, additionally, generated revenue from technology licensing in selected markets. Our medical components business, based in the USA, had another good year with continued growth of base and precious metal components for surgical devices.

Gold and Silver
Johnson Matthey’s gold and silver refineries located in Salt Lake City (USA), Brampton (Canada), Royston (UK), Melbourne (Australia) and Hong Kong enjoyed mixed fortunes. With world gold production unchanged, the market for primary gold refining continued to be very competitive but an improvement in the gold price in the second half of the year contributed to an increase in secondary refining. The performance of our Royston operation was impacted by high metal holdings at the start of the year as the refinery was reorganised to improve processing efficiency. The rationalisation of our Canadian business was completed during the year and the benefits of exiting low margin activities contributed to a further growth in profits. From 11th September onwards a series of gold price spikes stimulated dishoarding throughout the Asia region, which benefited the refineries in Hong Kong and Australia. In addition, the Hong Kong refinery achieved Good Delivery accreditation for its gold bars in August and Brampton was awarded similar status for its silver bars in December 2001.

 

Research and Development The division’s research and development programmes are focused on two main areas. Fundamental work is being undertaken on the performance of catalysts for ammonia oxidation that is designed to improve conversion efficiencies whilst minimising the production of unwanted by-products, which act as greenhouse gases. Secondly, our US based medical components business is actively developing new products for use in cardiovascular devices. These utilise the unique characteristics of platinum group metal alloys and the super-elastic properties of nitinol. In support of this growing area, a new development cell is being established at our Pennsylvania facility, which will further reduce response times to customer requests for new medical products.