Palladium set to overtake platinum – GFMS

JOHANNESBURG (miningweekly.com) – The palladium price is poised to exceed the platinum price for the first time since 2001, Thomson Reuters said on Tuesday with the publication of its GFMS Platinum Group Metals Survey 2017.

The price gap between platinum and palladium – which averaged just over $1 000/oz between 2007 and 2012 – is now at about $100/oz.

“In our view, it’s more a case of when, not if", Thomson Reuters precious metals demand manager Ross Strachan said of the prospect of palladium overtaking platinum.

Describing platinum as the worst performing precious metal in the year to date, Strachan said palladium’s persistent large deficit would see it above $850/oz well before year-end.

Last week saw platinum plunge precipitously to $893/oz, its lowest price ratio to gold since 1987, and at the time of going to press, its price was still in the doldrums at $910/oz.

However, platinum’s plunge is seen as being “too far and too fast” with GFMS expecting it to rally to above $1 000/oz this year on the back of weak mine output.

PLATINUM IN 2016

Mine production of platinum last year fell 2% to 6.05-million ounces (188 t) driven by lower production from South Africa’s five largest operations.

The closure of high-cost shafts and rand weakness pushed costs down 9% on a total production cost basis, while increasing earnings before interest and tax by 104% to $1 009-million, year-on-year.

Global platinum jewellery scrap edged 5% higher in 2016 to 0.57-million ounces (17.9 t) on a 15% jump in Chinese collections.

Autocatalyst scrap rose by the same percentage in 2016, reversing half of the prior year’s losses to reach 1.04-million ounces (32.4 t). The increase was fuelled by higher returns from Europe, aided by a recovery in the total recyclable value of vehicles, and from emerging markets.

Platinum consumption in autocatalyst applications rose by 2% to 3.3-million ounces (102.2 t) last year, less than half the pace of palladium demand growth, with surprisingly higher diesel-powered vehicle production and increased loadings to meet the Euro 6 emission-control legislation.

Platinum jewellery demand fell 12% to 2.18-million ounces (67.7 t), with China accounting for the bulk of this contraction, hindered by a softer economy and a market share loss to yellow 18 ct jewellery.

Elsewhere, fabrication demand in North America was also dragged lower by a lack of promotion and the high cost of jewellery, even though platinum was trading at a steep discount to gold.

The most pronounced of the 17%-higher other industrial gains were from the glass and petroleum sectors, as well as from a recovery in capacity expansions in paraxlyene, an aromatic hydrocarbon.

The only outlier last year was electronics demand which eased 2% on a drop in global demand for personal computers. 
 
PALLADIUM IN 2016

Palladium’s physical deficit grew 25% last year to 1.20-million ounces (37.3 t). Adjusting for stock movements, chiefly exchange-traded fund redemptions, the net balance rose to a deficit of 0.67-million ounces (20.9 t), GFMS found.

The production of palladium by mines fell 2% to 6.57-million ounces (204 t) on output reductions in South Africa, Russia and Canada, but this was offset by the ramping up of operations in Zimbabwe and the US. At the asset level, the largest decrease was registered at Norilsk’s Russian mine, while the largest increase was posted at Ngezi in Zimbabwe.

Almost exactly offsetting the decline in mine production was an increase in palladium scrap flows, from both autocatalysts and jewellery.

Autocatalyst scrap supply rose 7% to 1.72-million ounces (53.5 t), with increased receipts registered in all regions.

Demand in autocatalyst applications reached 7.36-million ounces (228.9 t), the fifth successive all-time high at a growth rate of 5% a year in petrol vehicle production.

This was driven by tax breaks in China and increased market share for petrol vehicles in Europe.

The 18% increase in Chinese petrol-vehicle offtake lifted China above Europe into the top demand spot for the first time.