Palladium Futures Index (PALLADIUM)

[Pro-Life]

‘Large’ palladium deficit expected, platinum in surplus

http://www.miningweekly.com/article/large-palladium-deficit-expected-while-platinum-remains-in-surplus-2011-05-05

By: Brindaveni Naidoo
5th May 2011
JOHANNESBURG (miningweekly.com) - Platinum is expected to remain in a surplus this year, while palladium – which is increasingly being used as a substitute for platinum – would see a “large” deficit in 2011, precious metals consultancy GFMS reported on Thursday.

Platinum registered a surplus of almost one-million ounces in 2010, marking the sixth consecutive year of a gross surplus, while sister metal palladium’s deficit returned to a “sizeable” level of 550 000 oz.

The platinum surplus rose 10% from 876 000 oz in 2009 to 962 000 oz in 2010, and also marked the highest level in GFMS’ 12-year data series.

GFMS also reported that, for the first time in four years, platinum output from South Africa - the world’s number-one platinum producer - increased by 3%, which it attributed to a release of metal from the process pipeline.

GFMS executive chairperson Philip Klapwijk said, at the launch of the ‘Platinum & Palladium Survey 2011’, that platinum would remain in a surplus in 2011 owing to an expected increase in mine output as a result of forecast gains in North America and an expected increase in jewellery and autocatalyst scrap.

Demand would grow but only modestly, GFMS predicted, as disruption in quake-hit Japan, slow diesel sales and substitution limit autocatalyst demand and the price-constrained jewellery demand.

Klapwijk is forecasting platinum prices “comfortably north” of $1 900/oz by year-end. The metal traded at $1 798/oz on Thursday.

For 2010, he pointed out that despite a decent rise in fabrication demand as the world economy started to recover, there was an even greater platinum supply response, partly as a result of firmer platinum prices.

A key contributor to demand for platinum, which increased to 6,73-million ounces, had been as a result of the 16% increase in autocatalyst fabrication.

However, autocatalyst demand at three-million ounces remained well below precrisis volumes owing to a sluggish recovery in Europe’s diesel sales and further thrifting and substitution to palladium.

The higher autocatalyst demand spurred the return of palladium to a gross deficit last year. Autocatalyst demand for the metal was at a ten-year high of 1,2-million ounce owing to car sales rebounding in palladium-focused markets, particularly gasoline, and the substitution of palladium in diesel.

For palladium, despite a 40% increase in the supply of jewellery scrap to 163 000 oz, demand for jewellery decreased by 27% to 809 000 oz, mainly owing to losses in China.

In contrast, on the demand side for platinum, heavy price-led losses in Chinese jewellery demand fed through to a 17% drop to 1,89-million ounces. Old jewellery scrap supply increased by 30% to 603 000 oz.

The fact that platinum prices rose in 2010, despite another surplus, was attributed to sustained investment, with the launch of the ?rst-ever US exhange-traded funds (ETF) and the marked rise in total ETF holdings singled out as causes.

“Platinum, along with the other precious metals, did benefit from a range of factors, such as low interest rates, in?ation fears, Eurozone sovereign debt travails and quantitative easing in the US,” Klapwijk said.

He stated that investment in ETFs should remain signi?cant in 2011.

“Sales from Russian government reserves should also again feature in 2011, although thereafter only residual volumes were expected as this sales programme winds down.”

Palladium prices could reach as high as $975/oz this year, Klapwijk stated.


Edited by: Mariaan Webb