Platinum and palladium
prices showed sharply diverging fortunes in 2002/03. The price of platinum
rose steadily for most of the year with solid demand, a widening deficit
in supply and lack of physical liquidity supporting successive rallies.
The price peaked at a 23 year high of $705/oz in March 2003 before falling
back as investors and speculators took profits on long positions.
Consumption of platinum
in autocatalysts rose in 2002/03 with continuing growth in the diesel
sector and efforts to thrift palladium through greater use of platinum
based catalysts, underpinning demand. Platinum sales to the Chinese
jewellery market continued to rise, although high platinum prices at
the end of the year put pressure on profit margins, dampening to some
extent enthusiasm for platinum amongst Chinese jewellery manufacturers.
Supplies of platinum increased only moderately, as higher output from
South Africa was balanced by a drop in sales from Russia.
Apart from some sharp
but fleeting spikes, the price of palladium fell steadily throughout
the year. Demand from most market sectors was weak, with the auto and
electronic industries making substantial use of inventories. In addition,
the switch away from palladium in response to the high prices of earlier
years continued; auto manufacturers increased the use of platinum catalysts
on gasoline vehicles and electronic component manufacturers continued
to substitute palladium with base metals in certain applications. Despite
sharply lower sales from Russia, supplies exceeded demand for the second
successive year.
The average price of platinum
for the year was $586/oz, an increase of 17% on 2001/02. Conversely
the average price of palladium fell by 36% to $305/oz. Weak prices and
poor demand for palladium and rhodium reduced profits in the division’s
marketing and trading operations from the level seen in 2001/02.
The division’s Noble
Metals manufacturing business continued to perform well despite difficult
economic conditions affecting many of its traditional customers. A further
increase in revenues was in part due to technical innovation which generated
income from new products and technology licensing. Our medical components
business, based in California, continued to grow, operating at full
capacity for much of the year. With further growth forecast, the business
will relocate to a larger facility in the summer of 2003. Our nitinol
operation, also located in California, finished its second full year
under Johnson Matthey ownership. With the completion of investment in
new manufacturing and information systems, it now boasts industry leading
product quality and delivery times.
Trading conditions for
Johnson Matthey’s worldwide gold and silver refining operations
remained difficult. Although the higher gold price increased secondary
supplies, primary gold production fell slightly and, with an excess
of worldwide refining capacity, margins remained under pressure. In
October 2002, we announced the merger of our Australian business with
that of AGR headquartered in Perth, Western Australia. The formation
of AGR Matthey, in which Johnson Matthey holds a 20% stake, will allow
the rationalisation of the combined refining and product operations.
Elsewhere, the North American refineries had a reasonable year but profits
from our Royston refinery were impacted by weak demand for gold bars.
Hong Kong again benefited from a series of gold price spikes which prompted
the dishoarding of secondary scrap across the Asian region.
