Global Palladium deficit set to widen this year

London (May 14)  The deficit in the palladium market looks set to widen dramatically in 2019, with stricter emissions legislation forecast to trigger a step change in demand from Chinese automakers, Johnson Matthey said in its latest PGM market report.

The European market is also seeing growth in the palladium content of gasoline aftertreatment systems, as testing becomes more stringent.

Palladium purchases by European car makers are forecast to rise by a further 8% in 2019, following an 11% gain last year, reflecting the implementation of the next stages of Euro 6 legislation.

Industrial demand for palladium is forecast to fall by 6% in 2019, due to an intensification of price-related thrifting and substitution in the electronics and dental sectors.

 ETF holdings stabilised in the first quarter after four years of heavy liquidation but, in any case, these funds no longer hold enough metal to bridge the gap between industrial demand and supplies, it said.

Primary supplies of palladium are expected to be flat, with modest releases of metal from pipeline inventories at South African producers helping to offset a reduction in Russian sales. Production at Norilsk Nickel will continue to benefit from the processing of palladium-rich surface materials, but shipments are forecast to be lower than in 2018, when substantial stock sales occurred.

Secondary supplies are forecast to increase again, but the rate of growth should moderate following two years of very rapid gains, the report said.

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