Platinum, Palladium supplies at 12-year low

LONDON: The platinum market swung into the biggest shortage since 2002 last year as supply fell to a 12-year low on strikes and stoppages in top producer South Africa, according to Johnson Matthey. The palladium deficit was the biggest since 2000.


The platinum shortage was 375,000 ounces last year and a “slight deficit” is possible this year if investment continues to grow, London-based Johnson Matthey said on Monday in a report. Platinum supply fell 13% to 5.64 million ounces, as total demand declined 0.6%, it said. Lower palladium sales from Russian state stockpiles and constrained output in Russia and South Africa is “a recipe for an under-supplied market” and higher prices, Johnson Matthey said.

“The supply that we see at the moment is being balanced by autocatalyst, jewelry and industrial demand,” Mark Bedford, managing director for precious metals at Johnson Matthey, said in an interview.

“Investment really becomes a balancing figure. If investment demand continues to be positive in 2013, I wouldn’t be surprised if we didn’t see a similar sort of deficit as the one that we saw this year.” Both metals are mostly used in vehicle pollution-control devices and jewelry, with palladium favored mainly for gasoline-burning engines in the US and Asia and platinum for diesels in Europe. Platinum holdings in exchange-traded funds expanded 11% this year after growing 16% in 2012, data compiled by Bloomberg show. Palladium ETF holdings are up 13% in 2013 after increasing 11% last year, the data show.

STRIKES, CLOSINGS

Platinum shipments from top producer South Africa dropped 16% to 4.1 million ounces as at least 750,000 ounces of supply was lost to strikes and mine closings, according to Johnson Matthey. Recycling slid 1.5% to 2.03 million ounces as lower prices encouraged stocks retention. Anglo American Platinum (AMS), the biggest producer of the metal, said May 10 it plans to cut platinum output by 250,000 ounces this year as part of the plan to return to profitability amid surging costs and slower demand.

Autocatalyst usage gained 1.7% to 3.24 million ounces on demand in Asia and North America and increased usage in the non-road diesel engines, the researcher and trader said. Jewellery consumption rose 12% to 2.78 million ounces and investment demand slid 1.1%. Autocatalyst demand is “unlikely” to grow this year and jewelry demand will decline “slightly,” according to the report.

AUTOMAKER DEMAND

Platinum for immediate delivery, down 3.5% this year to $1,485.60 an ounce, will average $1,570 in the next six months, it said. Palladium, little changed at $703.64 an ounce, will average $740 in the next six months, Johnson Matthey said. Palladium swung into deficit last year from a surplus of 1.19 million ounces in 2011 on record demand for autocatalysts and investor demand amid lower supplies, Johnson Matthey said.

Gross demand for palladium rose 16% as supply fell by 11% to 6.55 million ounces, the lowest since 2002.