Issue link: http://resourceworld.uberflip.com/i/832998
J U N E / J U L Y 2 0 1 7 www.resourceworld.com 11 Is palladium heading to a premium over platinum? Thomson Reuters released GFMS Platinum Group Metals Survey 2017, covering the PGM markets and looking at the future. Having averaged just over US $1,000/oz 2007-2012 the price gap between plati- num and palladium continues to drop. The superior performance for palladium is unsurprising since 2016 was another year of substantial deficit. In 2016, the platinum market was in broad balance at the physical level for a second year. A sharp reduction in jewellery offtake was offset by an increase in usage across industrial and automotive applications. The drop in mine output was counterbalanced by an increase in scrap supply. Platinum mine production fell by 2% in 2016 to 6.05 Moz. Global platinum jewellery scrap edged 5% higher in 2016. Autocatalyst scrap rose by 5% in 2016, reversing half of the prior year's losses. Platinum consumption in autocatalysts rose by 2% last year, less than half the pace of palladium demand growth. Platinum jewellery demand declined by 12% in 2016. Palladium's physical deficit grew by a quarter in 2016 to 1.20 Moz. Net Balance rose to a deficit of 0.67 Moz. Mine pro- duction of palladium contracted by 2% last year. Almost exactly offsetting the decline in mine production was an increase in scrap flows from autocatalysts and jewellery. Palladium demand in auto- catalyst applications reached 7.36 Moz last year, the fifth successive all-time high. Ross Strachan, Precious Metals Demand Manager at Thomson Reuters, said, "Platinum has been the worst performing precious metal in the year to date, continu- ing a pretty underwhelming performance in 2016. We do not expect it to continue to lag its peers substantially as the market has priced in much of the bad news, nota- bly with respect to diesel usage, and it is starting a recovery, albeit a cautious and difficult one. We are looking for a funda- mental deficit this year as mine production continues to be hindered by the lack of investment in earlier years. Palladium is in a persistent large deficit and the market is tightening, a development we think will be increasingly felt in the coming years, with more bouts of higher lease rates. This has also been translating into a strong price recovery, and while the market is susceptible to a short term correc- tion we would expect prices to recover to be in excess of US $850 well before year-end. In our view, it is more a case of when, not if, the palladium price will exceed platinum for the first time since 2001. However, we think that the recent move has been too far and too fast and platinum is set to rally to be above US $1,000/oz this year on the back of weak mine output." n