Platinum and Palladium (PGMs) forecast and analysis for Q2 2016

May 24, 2016 - 11:32 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, April 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 – Expect modest upward pressure

Platinum price chart

Palladium price chart

Summary
The PGMs were highly volatile in the first quarter, with platinum closing 9.5 percent higher after falling 26 percent last year and palladium ending flat after dropping 29 percent in 2015. Platinum should continue to perform relatively better than palladium although upward pressure should be limited amid poor investment demand.

Overall trend Platinum and palladium sold off sharply in January before recovering in February and March. We expect modest upward pressure on PGMs in the second quarter, with platinum ranging between $920 and $1,040 and palladium between $550 and $650.

Platinum looks brighter than palladium – Platinum performed better than palladium in the first quarter when gold’s strong rally exerted upward pressure on platinum (the two are strongly correlated) and because palladium tends to perform poorly when investors are risk-unfriendly – the sell-off in equities at the start of the year triggered a sell-off in palladium. Because we expect increased risk aversion in the second quarter, platinum should outperform palladium. The global automotive market should remain robust, partly due to lower energy prices, and a soft dollar should boost investment and speculative demand in the second quarter. For platinum, we expect ETF inflows to continue while speculative buying should pick up. For palladium, while we see outflows from ETF holdings on rising risk-off sentiment, speculative demand should recover. Still, mine output could grow despite low dollar-denominated PGM prices, principally because weaker energy prices and mining currencies in the second half could lower production costs, preventing a meaningful supply response.

Platinum chart - ETF holdings - spec positioning on NYMEX
ETF investors sold 26,00 ounces of platinum in the first quarter after selling 266,000 ounces in 2015. But money managers bought a total of 291,000 ounces in the first quarter after selling 454,000 ounces last year.
Palladium chart - ETF holdings and spec positioning on NYMEX
ETF investors sold 94,000 ounces of palladium in the first quarter of the year after selling 693,000 ounces in 2015. Money managers cut their long exposure by 122,000 ounces in the first quarter after selling more than 1 million ounces in 2015.

Download a PDF copy of the full report here.