From the 2008 peak to March 2009 trough the Amplats share price fell 75.00%. It has since risen 120.00% to the January 2010 high, but is currently still 50.00% below the high of R1460.00 in May 2008. Doubtlessly there are many fund managers/investors/traders that are trapped in stale long positions that will, for the long term, cap any serious upside in the Amplats share price.

Now to the fundamentals of Amplats and the investment case for being long, or alternatively short the stock. Amplats is major producer of platinum group metals such as platinum palladium and rhodium as well as base metals such as nickel, copper and cobalt. The basic investment case that will provide support for Amplats is therefore that industrial demand (and production of finished goods) will continue to rise over the next two years. Drilling down even further the demand for catalytic converters of which the PGM’s are a major component are considered the linchpin for ultimate demand for Amplats’ products.

In the period from 2004 through 2007 the sales for domestic constructed vehicles in the US was approximately 13 million units. After the financial crisis broke sales fell by almost half to 7 million units. The spike in sales in the third quarter of 2009 is directly attributable to the Obama administration’s ‘cash-for-clunkers’ program. In my mind there is no doubt that this program has cannibalised sales that would otherwise have been made in 2010. It is hard to see companies such as Amplats benefitting substantially in an environment of 8 million unit sales, notwithstanding tighter emission controls in the future. No need to worry say the bulls, as China is poised to assume the mantle of the largest consumer of vehicles and as with other concerns about global demand and production, China is seen as the elixir for all manner of problems.