Platinum to Palladium Shortages Seen Shrinking on Supply Rebound

Johannesburg-SA (May 19)  Shortages of platinum and palladium will contract from record levels as South African supplies rebound after last year’s mines strike and investors sell, according to Johnson Matthey Plc.

Palladium is set to record the smallest shortfall in four years in 2015, while platinum will come the closest to a balanced market in three years as recovering supplies offset growing demand from car-makers, data from the company showed.

Both metals have been in deficit since 2012 amid supply disruptions and as stricter legislation against vehicle emissions strengthened demand for the materials, which are used as catalysts in pollution-control devices.

“Demand from the auto sector is anticipated to rise to a new record high in 2015,” Rupen Raithatha, research manager at Johnson Matthey, said Monday by e-mail, referring to palladium. That will be outweighed by factors including the recovery of South African supply and “significant liquidation” by investors in exchange-traded products.

Palladium’s deficit will contract to 100,000 ounces in 2015, down from 1.8 million ounces in 2014, according to Johnson Matthey’s platinum group metals report on Tuesday. South African mine supply is seen recovering 17 percent to 2.48 million ounces, the highest since 2011, following the five-month mine strike that ended in June. South Africa is the largest platinum producer and second-biggest for palladium.

For platinum, the shortage this year is estimated at 285,000 ounces, with South African supply rebounding 19 percent to 4.24 million ounces. The country will account for 73 percent of global supply.

Auto-Catalyst Usage

Platinum demand is forecast to be little changed at about 8.31 million ounces, as a 10 percent increase in auto-catalyst usage to 3.7 million ounces is offset by investors selling 88,000 ounces compared with purchases of 272,000 ounces last year. Demand for jewelry will fall 1.3 percent, while increasing 2.9 percent for industrial uses.

Palladium demand will drop 12 percent from 2014 to 9.4 million ounces, with investors seen selling 400,000 ounces after buying 932,000 ounces last year. Jewelry usage may fall 34,000 ounces to 245,000 ounces, while industrial demand slips 2.4 percent to about 2.1 million ounces.

Platinum, favored in diesel engines commonly used in Europe, retreated 3.4 percent this year to $1,166.73 an ounce in London on Tuesday, according to Bloomberg generic pricing. Palladium, mainly used in gasoline engines that are more popular in the U.S. and China, slipped 1.6 percent this year to $785.25 an ounce.

ETP Holdings

Holdings in platinum-backed ETPs have fallen 7.5 percent from a record set in July to 82.9 metric tons, data compiled by Bloomberg show. Investors own 91.9 tons of palladium through ETPs, 4.2 percent below the all-time high set in August.

Supply from re-using jewelry and auto-catalytic converters will increase for both metals, with platinum recycling rising 6.8 percent to 2.21 million ounces and palladium by 4.5 percent to 2.87 million ounces, according to Johnson Matthey, which makes about a third of the world’s catalytic converters

Source: Bloomberg