HSBC Sees $1,075 Platinum, $790 Palladium In 2017By Kitco News
Friday December 23, 2016 10:17
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(Kitco News) - HSBC looks continued supply deficits to boost prices of platinum and palladium in 2017.
Platinum is forecast by the bank to average $1,075 an ounce next year, although this is down from HSBC’s prior forecast of $1,195. The palladium forecast for next year was upped to $790 from $760. In 2018, HSB sees platinum averaging $1,225 and palladium $850.
Around the middle of Friday morning ahead of a long Christmas holiday weekend, spot platinum was near $904 an ounce and palladium was trading around $656.
Platinum is expected to draw support from what HSBC described as a “persistent but narrowing deficit and price-sensitive investor demand.” The platinum supply deficit is seen at 150,000 ounces in 2017, compared to an expected 368,000 ounces in 2016.
Analysts suggested exchange-traded-fund and other investment demand is likely to rise on the discount in platinum prices to gold, while increases in auto and industrial demand should be supportive. However, they look for jewelry demand -- although likely to rise -- to remain sluggish.
The main industrial use for platinum, as is the case with sister metal palladium, is catalytic converters in motor vehicles. Auto demand growth should be slightly positive for this year and 2017, but noticeably less vibrant than in years past, HSBC said.
“We expect tighter emissions regulations globally to boost platinum usage in the auto sector over time, notably in heavier vehicles,” HSBC said. “Platinum loadings per vehicle in the key European diesel market may be topping out, however. Long-term auto demand growth in India and China is also platinum-supportive, in our view. This should result in modest increases in auto-sector platinum consumption in 2016 and 2017.”
Platinum-mine production growth is limited as capital expenditure cuts and restructuring limit output from the world’s largest producing nation, South Africa, HSBC said. However, the amount of metal that results from auto recycling may increase.
Meanwhile, HSBC looks for the deficit in palladium to widen, with a cessation in exchange-traded-fund sales. The palladium supply deficit is expected to be 1.108 million ounces next year after 373,000 ounces in 2016.
“Palladium has outperformed all other precious metals this year and tends to trade independent of the rest of the precious metals complex,” HSBC said. “It is impacted more by industrial demand and less by monetary policies and risk sentiment. A sharply widening deficit…is likely to propel palladium higher as scope for mine output remains limited and industrial and auto demand firm.”
The auto sector represents some 80% of gross palladium demand and this is expected to rise again next year, HSBC said. Meanwhile, jewelry demand is likely to remain weak and relatively small, HSBC added.