Platinum output in the former U.S.S.R. is primarily a byproduct of nickel mining in the Russian Republic, of which 90 percent is from the Norilsk complex. Mining statistics were state secrets under Communist rule, but Western mining experts indicate output declined 30 percent in 1991 and may fall 10 percent in 1992.

World open-market platinum demand rose 5 percent in 1991 to a record 3.88 million ounces, despite the global recession, Johnson Matthey, a platinum refiner, said.Norilsk's problems should have been bullish, considering the dollar's depreciation against the yen and the deutsche mark. However, Johnson Matthey estimates the former U.S.S.R. increased open-market platinum sales by 29 percent to 930,000 ounces in 1991.

This does not include some 740,000 ounces shipped to Switzerland during the first eight months of 1991, believed to have been used as security for hard- currency loans.

The metal sold outright largely went to Japan. Open interest in platinum futures is about seven times larger on the Tokyo Commodity Exchange for Industry than on the New York Mercantile Exchange.

According to an estimate by Japan's largest bullion house, Tanaka Kikinzouko Kogyo, Japanese investment demand for platinum totaled about 338,000 ounces in 1991, up 139 percent from 141,500 ounces in 1990.

To put that into perspective, Japan used about 370,000 ounces for catalytic converters last year, according to the trade house, which estimated total Japanese demand at 2.282 million ounces, up 13.4 percent from 1990.

The largest use for platinum in Japan is jewelry. Thanks to lower prices, sales increased an estimated 9.5 percent to 1.3 million ounces in 1991.

The gain was concentrated in lower-priced pieces popular with single Japanese women. Platinum jewelry is a novelty in the United States.

Otherwise, platinum is used for setting diamonds. But De Beers reported diamond sales fell 6 percent last year, and many U.S. jewelers had dismal holiday sales. With the Japanese economy slipping, lower prices may not increase jewelry usage significantly this year.

Japanese investors tend to buy platinum on price weakness and hold for the longer term. As the chart below shows, they had plenty of opportunities to do so last year.

This strategy also applies to futures speculators, who tend to hold onto positions in deferred contracts. That proved disastrous when August contracts expired, and because of the dollar's late December dive, a similar sell-off is possible now.

Fear of Japanese selling may be restraining the market's response to continued labor problems in South Africa. However, current prices are a greater threat to South African output. Several mines put expansion plans on hold last year because of low prices, which are probably at or below break- even levels.

We think the cutbacks, combined with a steady improvement in industrial demand as more nations adopt stricter auto emissions standards, will stabilize platinum prices later this year, even if car sales remain depressed. But it is too early to look for a bottom.