(Kitco News) – The palladium market was in a supply/demand deficit of more than 1 million ounces in 2019, and the shortage is expected to be even worse in 2020, said Johnson Matthey Wednesday in a report on the platinum group metals.
Meanwhile, sister metal platinum was in a slight deficit final yr, however might find yourself in a surplus in 2020 until there’s substantial funding demand for the steel, Johnson Matthey mentioned.
Palladium costs rose sharply in 2019 and are up once more in 2020. Analysts typically have cited sturdy auto-catalyst demand that’s inflicting a unbroken broad provide deficit.
“The palladium market deficit widened to over 1 million ounces in 2019, as mixed main and secondary provides grew solely modestly, whereas auto-catalyst demand surged greater on the again of recent [emissions] laws in China and extra stringent testing regimes in Europe,” Johnson Matthey mentioned.
The firm mentioned that common palladium loadings rose by 14% in gasoline-powered vehicles. This drove automotive demand for palladium to a report excessive of 9.7 million ounces, regardless of decrease auto manufacturing in most regional automotive markets.
All types of palladium demand amounted to 11.5 million ounces in 2019, up from 10.2 million in 2018, Johnson Matthey mentioned. Mine manufacturing eased to six.89 million ounces from 7 million, harm by decrease shipments from Russia. Nevertheless, recycling climbed to three.42 million ounces from 3.12 million.
Funding demand remained unfavorable, though the tempo of liquidations slowed significantly from the earlier a number of years, Johnson Matthey mentioned. Some 700,000 ounces of palladium have been in exchange-traded-fund vaults at the beginning of 2019, down from a peak of practically 3 million in 2015. By August, the whole fell to 590,000, earlier than some reasonable ETF shopping for within the ultimate quarter of 2019, leaving them at round 660,000 ounces on the finish of the yr, the report mentioned.
Johnson Matthey put the “motion in shares,” or world provide deficit, at 1.19 million ounces in 2019.
“The palladium deficit is more likely to deepen in 2020, as an rising variety of Chinese language and European automobiles meet China 6 and Euro 6d laws, respectively,” Johnson Matthey mentioned. “That is anticipated to drive up world common loadings on gasoline catalysts and will raise world automotive demand above 10 million ounces.”
As a outcome, costs are more likely to stay excessive, Johnson Matthey mentioned.
“There might now be some short-term potential for thrifting and substitution within the automotive business, however that is unlikely to be sufficient to forestall demand from rising once more in 2020, with each Europe and China anticipated to see additional will increase in common palladium loadings on gasoline vehicles this yr,” mentioned Johnson Matthey.
Platinum might transfer again into surplus in 2020
“The platinum market swung into deficit in 2019, as a resurgence in ETF shopping for lifted bodily funding demand to a report 1.13 million ounces,” Johnson Matthey reported. “This outweighed a modest contraction in world industrial and automotive demand and a double-digit drop within the Chinese language platinum jewellery market.”
The platinum funding demand grew although no new ETFs have been launched, Johnson Matthey identified. Many traders apparently view platinum as underpriced, as costs have been “subdued” whereas palladium soared, the report mentioned.
In the meantime, auto-catalyst demand fell 2% to 2.91 million ounces final yr as a consequence of decrease output of diesel vehicles and a delay in stricter heavy-vehicle emissions guidelines in China, Johnson Matthey mentioned. There was additionally weak spot within the Chinese language jewellery sector as fabricators transfer towards gold as a substitute.
Johnson Matthey put the availability deficit for 2019 at 203,000 ounces. The corporate estimated 2019 gross platinum demand at 8.48 million ounces, up from 7.79 million in 2018. Mine provide fell to six.02 million ounces from 6.11 million, whereas recycling got here in at 2.26 million, in comparison with 2.1 million in 2018.
“Until investor appetites are sustained into 2020, the platinum market might transfer again into surplus,” Johnson Matthey mentioned.
The firm mentioned it expects elevated loadings of PGMs in heavy-duty vehicles in China and India as a consequence of stricter emissions guidelines, however mentioned this may be offset by additional weakening of demand for jewellery in China and fewer shopping for from the glass sector.
Nevertheless, mine provides might fall beneath 6 million ounces for the primary time in six years, Johnson Matthey mentioned.
Rhodium seen remaining in deficit in 2020
Rhodium, a extra calmly traded PGM, was in a “modest deficit” throughout 2019, Johnson Matthey mentioned. Using the steel for autocatalysts rose by practically 15%. As was the case with palladium, rhodium costs rose sharply.
“The outlook for 2020 is for a deepening market deficit, with additional sturdy beneficial properties anticipated in auto-catalyst demand, albeit at a slower fee than final yr,” Johnson Matthey mentioned.
For 2019, mined provide was 746,000 ounces, down from 757,000 in 2018. Recycling was 372,000 ounces, up from 335,000. In the meantime, demand climbed to 1.14 million ounces from 1.04 million in 2018, leaving a market deficit of 26,000 ounces.
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