The following is a release by London-based consultancy Metals Focus upon the publication of “Platinum & Palladium Focus 2019,” its flagship annual report on the platinum group metals (PGM) market, which features comprehensive historical supply and demand statistics for 2010-2018, and a detailed 2019 forecast. For more information and to purchase a copy, visit www.metalsfocus.com.
Palladium is forecast to once again outperform platinum in 2019.
Divergent trends in platinum and palladium’s fundamentals continued in 2018 and are forecast to persist this year, and beyond. Platinum recorded a surplus last year of 349,000 oz. (10.8 tonnes), while palladium saw another hefty deficit of 821,000 oz. (25.5 tonnes). These impacted investor sentiment, helping drive palladium’s out-performance of the platinum price.
While more recent price developments may suggest a reversal, we believe these moves are driven by speculative forces and so are likely to be short-lived.
As a result, our 2019 forecasts see platinum realize a surplus of 630,000 oz. (19.6 tonnes), and palladium a deficit of 574,000 oz. (17.9 tonnes). As a result, platinum above-ground stocks are forecast to continue rising, to 9.7 million oz. (302 tonnes) at end-2019, against 6.9 million oz. (215 tonnes) at the start of this decade. Palladium stocks, by contrast, have enjoyed near uninterrupted losses, from 17.7 million oz. (550 tonnes) at end-2010 to an end-2019 forecast of 12.9 million oz. (400 tonnes).
Looking at the key areas of supply/demand, platinum autocatalyst demand is expected to post its third year of losses (of 2%), due to further weakness in the key diesel market in Europe and the lack of any substitution to platinum.
The scale of the drop in 2019 is expected to be smaller than in 2018, due to concerns over meeting emissions legislation and also because of notable gains in heavy duty diesel.
Turning to jewellery, this will see a 3% year-over-year drop, led by a sharp fall in China. Physical investment is slated to ease by 15% year-over-year, but this compares with a strong 2018 total, while industrial offtake should rise by 4%. As such, we forecast total platinum demand to drop for a fourth year, by 1.2% to 7.70 million oz. (239 tonnes).
On the supply side, mine output is forecast to rise by 3% in 2019, chiefly due to strong gains in South Africa (helped by a weaker rand and somewhat lower cost inflation).
Concerning our platinum price forecast, investor sentiment towards the metal appears less bearish compared to 2018. This, coupled with our constructive view towards gold, is expected to deliver a further recovery in platinum price later this year. However, unsupportive fundamentals will still weigh on platinum, which explains our forecast of a 1% dip for platinum’s annual average this year to US$875 per ounce.
Switching to palladium, autocatalyst demand is forecast to rise by 3.6% in 2019 to a record high of 8.59 million oz. (267 tonnes), driven by the impact of tighter emissions standards on PGM loadings (in most regions) and an increased market share for gasoline vehicles in Europe.
In addition, growing consumer preferences for larger vehicles in most markets, in particular in the U.S., is also putting upward pressure on loadings. Finally, demand will be supported by the current absence of substitution within gasoline to platinum, while concerns over rhodium could, for some models, lead to a partial switch in favour of palladium.
Regarding palladium supply, this is forecast to increase by 4% to 10.11 million oz. (314 tonnes), led by a 5% increase in mine supply to 7.17 million oz. (223 tonnes).
Most key producing countries are forecast to see higher output, which will offset losses in Canada.
Recycling is also expected to post a 3% rise to 2.94 million oz. (91 tonnes), chiefly due to a new high from spent autocatalyst recycling.
In spite of short-term headwinds — such as lacklustre car sales in China and the U.S., and concerns over the potential for substitution losses in light vehicles — we expect palladium to realize a physical deficit for the foreseeable future.
As such, for 2019, Metals Focus believes that professional investors will eventually return to palladium, with prices forecast to surge by 45% year-over-year to an annual average of US$1,490 per oz. in 2019.