London, 5 February 2011

The cost of platinum group metal iridium may scale new multi-year peaks in 2011, with demand firm even after prices more than doubled in the last year, a senior executive at metals refiner Johnson Matthey said last Thursday.

While considerably higher prices may damage demand, Peter Duncan, JM's general manager for market research, said a combination of new industrial uses for the metal and global economic recovery were likely to provide solid support. Duncan said iridium, which on Thursday rose to its highest price in at least 18 years at $865 an ounce, had been boosted by surging industrial appetite.

"There is still strong demand at the current price level, which suggests it can go higher," he said. "Demand is real. It is not speculative, there is real industrial buying driving it."

Iridium was one of the best-performing precious metals last year, with prices climbing more than 80 percent to $770 an ounce by the end of 2010 from $420 in December 2009.

The silvery-white metal, which is four times less abundant than gold, is highly resistant to heat, making it ideal for use in high-temperature crucibles, and it has various applications in the chemical, electrical and electrochemical sectors.

Johnson Matthew figures show consumption of the metal leapt to 204,000 ounces last year from 81,000 ounces a year before as new technologies and changing legislation fuelled demand.

Duncan said the rising production of sapphire crystals for use in LEDs had added greatly to demand. "The explosion in demand for LEDs for backlit televisions and hand held devices has driven really strong demand for sapphire," said Duncan. "One of the methods of growing very pure sapphire is to cool the crystals from iridium crucibles."

"That market exploded in the last year or so and continues to do so," he said, adding most of this activity was in Japan, as well as in the United States and increasingly China. This is adding some 50,000 ounces of demand a year, he said.

LEGISLATION SUPPORTS

An extra 15,000-20,000 ounces of demand was being added each year by the chlor-alkaline industry, Duncan said. The chlorinemaking industry is an established user of iridium in membrane cells.

Under Chinese environmental legislation, chlorine production must transfer to membrane cells from diaphragm or mercury cells from 2010-2012.

Duncan said on environmental and cost grounds, iridium coated electrodes were also replacing lead electrodes in electrowinning, a process used in nickel and copper production. More traditional demand areas such as acetic acid production have also strengthened, with users restocking as the global economic recovery starts to gains traction, he added.

"We have a combination of recovery from industrial recession and all these new areas coming in which are fundamentally adding to the underlying level of demand," said Duncan. "Demand has shot up in a market that has traditionally been oversupplied."

Duncan said he has few concerns over supply, some 95 percent of which he says originates in South Africa. Iridium is largely mined as a by-product of other metals, like platinum. "The South African platinum industry has a good opportunity to recover in the next few years, even without any significant capital investment for new project growth," said Duncan.

Ends --

By Jan Harvey, Reuters – for Commodities Now