Platinum and Palladium forecast and analysis for Q1 2016

Feb 16, 2016 - 10:39 AM GMT
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Each Quarter FastMarkets and Sucden Financial produce an analysis and forecast report on the precious and base metals – The Sucden Financial Metals Reports, Jan 2016.

Below is the PGMs report, to download a PDF copy of the full report covering all the metals in pdf form click here.

Subscribers have access to these reports before they are published through the research tab in FastMarkets Professional.

PGMs – Weakness set to continue

Summary

The PGMs were the worst performing precious metals in 2015, with platinum falling 26 percent and palladium dropping 29 percent. After facing downward pressure in the fourth quarter of 2015, we expect further weakness in PGMs in the first months of the year amid continued poor sentiment.

Platinum Price Chart 2012-16  - FastMarkets Quarterly Metals Report Q1 2016

Palladium price chart 2012-16  - FastMarkets Quarterly Metals Report Q1 2016

Overall trend – The platinum group metals (PGMs) continued to fall in the fourth quarter of 2015, particularly in November, with platinum and palladium dropping two percent and 14 percent respectively. In the first quarter of 2016, we expect platinum to range between $800 and $950 per ounce and palladium to range between $450 and $570.

Investor sentiment set to remain negative – The fourth quarter of last year was marked by poor investment sentiment. Platinum ETF holdings fell 280,844 ounces and palladium ETF holdings dropped 543,633 ounces. ETF investors are expected to continue to liquidate their shares in this quarter, partly owing to a risk-off environment, weak industrial demand and the weak rand, which is giving South African investors an exit window. Money managers, who were modestly bullish on platinum and mildly bearish on palladium, could also be inclined to rebuild some of their bearish bets. But the global automotive market remained solid in 2015 and is expected to grow at a faster pace in 2016. China remains the big unknown market – recent jitters in its stock market seems to have spooked PGM investors.

Supply adjustments likely to take time – Mine output continued to grow in 2015 although more than half of South Africa PGM production was underwater. Although output should fall in the long term, the continuing recovery in South Africa production following the 2014 strikes, low energy prices and falling local currencies against the dollar may prevent a significant fall in production in 2016.

Platinum Chart -  ETF holdings ands Spec positioning on NYMEX  - FastMarkets Quarterly Metals Report Q1 2016

ETF investors sold 266,000 ounces of platinum (a drop of 10 percent) in 2015 while money managers liquidated 411,000 ounces (a drop of 48 percent).

Palladium Chart - ETF holdings and Spec positioning on NYMEX  - FastMarkets Quarterly Metals Report Q1 2016

ETF investors and money managers reduced their long exposure in palladium in 2015 by 693,000 ounces or 22 percent and 1.109 moz or 56 percent respectively.

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