palladium shine in 2010-11 Reuters | Wed, 27 Jan 2010 16:19 [miningmx.com] -- Platinum and palladium are poised to outperform other precious metals this year and next, with a new wave of investor demand boosting prices in anticipation of increased industrial use, a Reuters poll showed.
Palladium is singled out as the top performer over the rest of the sector, according to the poll of 60 leading analysts and traders conducted in January.
The median forecast of $434 an ounce was some 50 percent above 2009's median price according to Reuters data of $289. Last year platinum rose 59 percent, and palladium prices more than doubled.
The metal, primarily used in gasoline engines, is heavily exposed to the U.S. car market, which is expected to bounce back relatively well this year. As a smaller and less liquid market than platinum, it is also more volatile.
Platinum prices should also put on a robust performance, with a median forecast of an average $1,553.75 an ounce beating last year's median spot price by 29 percent.
"Investment demand should continue to gain importance in the platinum market," said London-based BNP Paribas analyst Anne-Laure Tremblay. "We expect the platinum market to be in deficit in 2010 after registering a surplus in 2009."
"Supply issues will remain," she added. "At the same time, fabrication demand should recover, especially in the first half of 2010."
Next year, the two metals are expected to keep climbing, with platinum seen averaging $1,650 an ounce and palladium expected to extend gains to $480 an ounce.
Spot platinum was bid at $1,519 an ounce, while spot palladium was bid at $421 an ounce around midday in London.
Both platinum and palladium are benefiting from investors' interest in new exchange-traded funds (ETFs) backed by the metals in the United States, which give U.S. investors exposure to the underlying spot price without taking delivery of the metal.
The funds issue securities backed by physical stocks of the precious metals, so their launch may take significant volumes of platinum and palladium off the market.
"Investors do want exposure (to platinum group metals) and that does mean the ETFs will be absorbing physical metal, which will further tighten the market," said Societe Generale analyst David Wilson.
SUPPLY ISSUES ANTICIPATED
Potential supply issues from South Africa may also support platinum. Producers there suffered a spate of power outages and labour issues last year, and analysts say plummeting PGMs prices last year may have led to cuts in capital expenditure.
South Africa produces four out of every five ounces of the world's platinum and supply disruptions there were a key factor driving prices to a record $2,290 an ounce in 2008.
Palladium supply is also heavily dependent on sales from Russian state inventories, which are uncertain.
"Palladium is only really in surplus because of Russian stockpile disposals," said Calyon analyst Robin Bhar. "There was a lot of talk throughout 2009 that the stockpiles may run out a lot sooner than people had reckoned."
For the moment, however, dealers say supply of both is still plentiful in Europe, with weakness in buying by the automotive sector -- the source of over half of all platinum and palladium demand -- last year leaving material readily available.
Nonetheless, against a backdrop of limited supply and better demand this year, both metals are expected to keep climbing.
This continued strong performance is in part on the back of an expected recovery in the automotive sector.
China's auto sales surged past those in the United States to reach record levels last year, and automakers are poised for solid but slower growth in 2010. U.S. auto sales also ended 2009 on an upswing after a tough year.
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