Platinum and Palladium analysis and forecast for Q4 2015

Nov 3, 2015 - 7:28 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, Oct 2015.

Below is the Platinum and Palladium report, to read 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 – Rebound likely to emerge later this year

Summary

Platinum and palladium remained under pressure in the third quarter, falling 13 percent and nine percent respectively due to the slowdown in China’s automotive sector, spec liquidation and higher mine output. Still, we expect both metals to bottom out from the fourth quarter, with palladium outperforming platinum.

Platinum Price chart 2012-2015

 

Palladium price chart 2012-2015

Overall trend – Although the PGMs weakened further in the third quarter amid fragile investor sentiment, reaching new 2015 lows, palladium seems to have started to rebound since August while platinum has remained in a downward spiral. The slowdown in the Chinese automotive market – sales fell 3.2 percent in June and 6.6 percent in July – exerted strong downward pressure on PGM prices. More recently, the VW emissions scandal has boosted palladium prices while depressing those of platinum. So far this year, ETF investors and speculators have preferred platinum to palladium. Investors have been net buyers of platinum but net sellers of palladium, while speculative selling in the futures market has been relatively less aggressive in platinum than palladium. While this strategy is particularly relevant in a risk-off environment, we expect reduced risk aversion in the fourth quarter so investors and money managers could turn more constructive toward palladium. Low PGM prices put more than half of South African PGM production under water. This unsustainable situation has resulted in announcements from major producers of lower output via mine closures and job cuts. Although PGM prices may be undermined by poor sentiment in the near term, lower mining supply will eventually tighten the supply-demand balance, which could lend some support to prices.

Platinum - ETF holdings and spec. positioning on NYMEX

ETF investors bought 52,000 ounces of platinum in January-August (+2.0 percent) while money managers liquidated 345,000 ounces (-40 percent).

Palladium - EFT holdings and spec positioning on NYMEX

ETF investors and money managers have cut their long exposure in palladium so far this year by 186,000 ounces (-6 percent) and 1.35 million ounces respectively (-69 percent).

 

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