Palladium to narrow annual deficit in 2019, platinum surplus grows

Palladium will narrow its deficit to 574,000 ounces in 2019 from 821,000 ounces last year while platinum's surplus is seen nearly doubling to 630,000 ounces, research group Metals Focus said on Monday. Palladium, used to reduce emissions in petrol cars, will record its eighth year of deficit, driven by tighter emissions standards that require a higher loading of the metal in catalysts and higher demand for cars powered by gasoline in Europe. This should help prices hit a new record annual average of $1,490 per ounce. Spot prices are up nearly 7% so far this year to around $1,348.
"This reflects strong underlying supply and demand, which will deliver yet another physical deficit," Metals Focus said in a report.
"In spite of short-term headwinds (such as lacklustre car sales in China and the US, and concerns over the potential for substitution losses in light vehicles), we expect palladium to realise a physical deficit for the foreseeable future."
Palladium demand from autocatalysts, which accounts for the majority of the metal's usage, is forecast to rise 3.6% to a record high of 8.59 million ounces while a rise in mine supply should lift output 4% to 10.11 million ounces
In platinum, demand is expected to fall for a fourth straight year to 7.7 million ounces mainly due to a weakness in the key diesel market while supply should inch 3% higher on higher output from top producer South Africa.
This will help push up platinum above-ground stocks to 9.7 million ounces by the end of the year from 6.9 million ounces at the start of this decade, Metals Focus said.
In other platinum demand, jewellery usage should slip 3%, physical investment will ease by 15% while industrial offtake will buck the downward trend by rising 4%, the precious metals consultancy said. Despite a rally earlier this year in platinum price to near one-year highs, Metals Focus expects the annual average price to slip 1% to $875 per ounce due to weak fundamentals. Prices are at $863.
"While more recent price developments may suggest a reversal (in palladium's premium over platinum), we believe these moves are driven by speculative forces and so are likely to be short-lived," the research group said.