* Platinum price reaction to strike milder than expected
* Stock estimates range between 4 mln and 20 mln oz
* No data available for total stocks in Zurich free zone
By Silvia Antonioli and Clara Denina
LONDON, June 25 Underground vaults next to a
Swiss farming village may reveal one reason for the platinum
market's indifference to its biggest ever supply shock.
Most analysts and market players expected steep price
increases for the precious metal as a record five month mining
strike in South Africa, which ended on Tuesday, wiped out some
40 percent of global supply.
Yet values have been stuck in a $140 an ounce range
gaining just five percent so far this year.
Estimates of total platinum stock value vary by billions of
dollars, mainly because of uncertainty over how much metal is
stored in off-shore vaults.
The Zurich Freilager, or freezone, has been used since the
1920s to store valuables, but very little is known about what
goes and out of the industrial park, advertised by precious
metals brokers for the high level of privacy it offers.
Its vaults alone could hold around 20 percent of the total
stocks of platinum in London and Zurich, the world's two main
two storage centres for the metal, market players said.
"Miners, refiners, investors, trade houses: they all hold
stocks there," a German trader close to the car industry said.
He and other sources in the industry, the main consumer of
the metal for catalytic converters, said this was a major reason
prices did not shoot up with the strike.
"Every company knows how much it has but not how much the
others have. But users know that there is metal there and
therefore there was no panic buying," the trader said.
Storing metal in bonded warehouses is routine practice among
purveyors of commodities and the companies involved have not
come under the kind of international pressure for more
disclosure felt by Switzerland's famously secretive banks.
The Swiss Federal Department of Finance (FDF), however,
voiced concern over the Freilager system in a consultation paper
in 2012 that is expected to lead to some reforms by the end of
this year. Among issues it raised was the ease with which the
stored goods can be sold in the vaults without tax consequences.
In April, the Swiss Federal Audit Office noted the
warehouses' role in easing trade but asked the government to
present a more comprehensive plan for them by the end of 2015
"that takes the economic and political stakes into account".
Its report noted issues such as "errors relating to the
customs tariff, declaration of origin when declaring goods;
inventory irregularities; a lack of traceability of the
merchandise; and flaws in stock accounting".
The Swiss Union of Freeports which represents the industry
was not immediately available to comment.
Freilager's tax-exempt status means any platinum stored
there does not appear in official import/export data and few
people get to see it, let alone assess how much is there.
Mark O'Byrne, director of precious metals brokerage
Goldcore, visited an underground vault there in 2008 and saw 1kg
and 6kg bars or platinum. But it was not stored by itself.
"There were a large number of pallets on which were piled an
array of gold, silver, platinum and palladium bars," he said.
While small holders might share a vault with others,
medium-large companies would normally have their own.
Zurcher Freilager AG, the company named after the free zone
area in which it lets space for storage, said that what
companies store in rented premises was "beyond our knowledge".
It declined Reuters access to their facilities.
"We don't ... give information about clients' business and
the facilities of our company," chief financial officer Frank
Smits said in an email.
Logistics firm Via Mat International, one of the main
companies that brokers say rents space from Zurcher Freilager AG
to store customers' metal, said it operates vaults in bonded
warehouses in the greater Zurich area but declined to give
further information, citing security and confidentiality.
Zurich has traditionally been the hub of platinum storage
and distribution by traders, bankers and producers, although
Singapore, Hong Kong and London have tax free storage areas too.
Swissmetal Inc. (SMI) stores over 400 tonnes of precious and
rare strategic metals in Zurich Freilager, with a partner, but
said it could not disclose how much of it was platinum.
"Over the past few years, the amount of metal stored in the
Zurich free zone has increased a lot," said General Manager Knut
Anderson, who last visited the Freilager vaults five months ago.
"Demand for storage space (there) now outstrips supply."
Market players in all commodities seek to keep their
holdings under wraps, but most do not have the option, for
largely logistical reasons.
Large amounts of copper for example are stored in bonded
warehouses in China but flows have been tracked since the
warehouses started to be used, in the 2000s.
Bonded stocks estimates for copper are available and vary by
only about 10-20 percent unlike those for platinum, which has
been stored in vaults for almost a hundred years.
"Copper warehouses are still generally accessible. You can
go and take a look or probably you know somebody who has taken a
look," Macquarie head of metals research Colin Hamilton said.
"But platinum has been there for years and the metal is
stored in a vault so unless you have access to that vault, which
would be limited to very few people, then no one is going to
Given the lack of visibility, most platinum analysts ignore
off-shore stock movements when estimating global inventories,
generally including import data, stocks backing platinum futures
contracts and exchange-traded fund (ETF) holdings.
The resulting estimates range from 4 million to 20 million
ounces, worth anything between $5.8 billion and $29 billion.
(Additional reporting by Joshua Franklin and Paul Arnold in
Zurich, Ed Cropley in Johannesburg, Noah Barkin in Berlin and
Polina Devitt in Moscow; editing by Philippa Fletcher)