How drop in Chinese auto sales affect Palladium market?

Shanghai (Sept 15)  News last week that car sales in China fell in August on a year-on-year basis for the third straight month means headwinds for palladium, said Mitsubishi.

The firm cited a news reports showing that August sales fell 3.4% to 1.4 million units, compared with a year earlier.

“This slowdown in the world’s largest car market has had two main impacts on the palladium market. It has left car manufacturers with excess metal on their books, which would have otherwise been used on vehicle catalysts – thus forward contracts are being rolled and the market is essentially in short-term oversupply,” said analysts at Mitsubishi.

“Secondly, it has negatively affected investor sentiment towards palladium, with investors having previously priced in strong vehicle sales growth in emerging markets. Spec gross long futures dropped to four-month lows while ETF (exchange-traded-fund) investors continued to shed holdings,” they added.

Source: BullionStreet