Commerzbank: Little Potential For Platinum Recovery; Palladium To Ease In 2H
Analysts see an “oversupplied” platinum market this year and a smaller deficit in palladium, they said in an outlook report released Wednesday.
Analysts see platinum averaging $925 an ounce in the second quarter and then $975 in the third and fourth quarters. Palladium was forecast to average $975 in the second quarter but $950 in the third and fourth quarters.
As of 9:55 a.m. EDT, spot platinum was at $939.40 and palladium was at $974.30.
The main industrial use for both metals is catalytic converters in automobiles. Gasoline-powered vehicles use palladium, while diesel-powered ones require platinum.
In the case of platinum, Commerzbank looks for the metal to tick modestly higher in the second half of the year largely on the coattails of gold rather than its own supply/demand fundamentals.
“Given the falling demand for diesel cars in Europe, the headwind for platinum is likely to continue, slowing the demand for platinum from the automotive industry, especially as more platinum is being recovered from old catalytic converters at the same time,” Commerzbank said.
Analysts said jewelry demand for platinum is expected to “stabilize at best.”
“Only investment demand could ensure that the platinum market does not again show a supply surplus,” Commerzbank said. “Reliable predictions are difficult here given the frequently opposite direction of ETF [exchange-traded-fund] and bar demand. That said, a strong impetus from bar demand, as in 2015 and 2016, can only be expected if the platinum price falls sharply or the yen strongly appreciates.
“In our opinion, the platinum price is unlikely to develop its own strength but essentially follows the gold price.”
Analysts look for gold to average $1,300 in the second quarter but then rise to $1,350 in the third and fourth quarters. Silver is seen averaging $16.50 in the second quarter, $17 in the third and $18 in the fourth.
“Next year, platinum should be pulled up by gold to an average of $1,100 a troy ounce,” Commerzbank added.
Meanwhile, Commerzbank said it looks for the supply deficit in palladium to narrow in 2018 due to weakening demand growth and continuing ETF outflows. Those outflows have hit nearly 200,000 ounces so far this year.
“If the automotive sector [was] to lose momentum, and there are some signs of this happening, this would noticeably dampen the demand for palladium,” Commerzbank said. “Furthermore, on account of its industrial use, palladium has a positive correlation with base metals and we expect to see a price correction there in the course of the year. All these factors should weigh on the price of palladium.
“We therefore expect the price to fall to $950 a troy ounce by mid-year. The likely increasing use of palladium in catalytic converters next year amid stricter emissions regulations should prevent a further price fall in the second half of the year. For 2019, we expect a price increase to $1,000 per troy ounce.”