Scarce supplies seal palladium’s price dominance over platinum

LONDON. — Gaping supply shortages will see palladium cement its price premium over sister metal platinum next year, according to a Reuters survey which showed analysts raising their forecasts for both autocatalyst metals. Zimbabwe is a producer of both platinum and palladium through three operating mines Zimplats, Mimosa and Unki. Two more under Great Dyke Investments and Karo Resources are at different stages of development.

Chiefly used in vehicle exhausts to reduce harmful emissions, platinum is favoured for diesel engines and palladium is preferred for petroleum.

Years of oversupply and the declining popularity of diesel vehicles have halved platinum’s value since 2011 to around $900 an ounce, while undersupply more than doubled palladium prices over the same period to some $1 750.

The poll of 28 traders and analysts in mid-October returned a median forecast for platinum to average $863 this year — the lowest annual average since 2004 — and $919 in 2020.

Palladium’s median forecast was for an average of $1 495 this year and $1 550 in 2020 — the two highest annual averages on record.

Since then, prices of both have risen as the palladium market tightened again and a rally in gold lifted other precious metals including platinum.

“Palladium will continue to outperform,” said Refinitiv analyst Saida Litosh. “While we expect total supply to grow, particularly driven by higher scrap flows, this will not be enough to keep up with demand.”

Tightening emissions regulations are putting more palladium in each vehicle, supporting consumption even as weakening global economic growth hits vehicle sales.

Platinum meanwhile is still reeling from lower diesel vehicle sales after Volkswagen was found in 2015 to have cheated emissions tests, and demand for platinum jewelry, particularly in China, is weak, Litosh said.

Automakers account for around 80 percent of palladium use and some 40 percent of demand for platinum, which is also used for jewelry and other industrial applications.

The deficit in the roughly 10 million ounce-a-year palladium market will rise from around 560 000 ounces this year to some 1 million ounces in 2020, ANZ analyst Daniel Hynes said.

The surplus in the 8 million-ounce platinum market, meanwhile, will increase from 100 000 ounces this year to around 515 000 ounces in 2020, he said. — Financial Post.

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