(Kitco News) - Investment demand for precious metals should rise in the second half of 2012, and that should support platinum group metals prices, said a London-based consultancy.
Gold investment demand is expected to rise in the later part of 2012 and that should spill over to platinum and palladium, said Thomson Reuters GFMS in the release of its Platinum and Palladium Survey 2012 Thursday. The consultancy estimates platinum prices will trade in range of $1,475 to $1,775 an ounce for the rest of this year. Palladium prices are forecast to range between $575 to $775 an ounce for the rest of this year. On Wednesday, New York Mercantile Exchange July platinum settled at $1,564.40 and June palladium settled at $669.45.
Platinum should also find support from production cost pressure in the South African mining industry, while palladium should continue to find support from autocatalyst demand, Thomson Reuters GFMS said. The European sovereign debt-crisis is a downside risk, especially for platinum autocatalysts, given the concentration of that metal’s use in Europe. Palladium’s demand base is less exposed to Europe and is more geographically diverse, the firm said.
During 2011, the consultancy said the surplus of platinum metal supplies fell by 12% to 735,000 ounces, or 22.9 metric tons, as fabrication demand rose. Although stockpiles fell, the surplus of metal remains “substantial,” said Philip Klapwijk, global head of metals analytics at Thomson Reuters GFMS in a news release about the survey.
Strength in investor demand and fabrication usage helped to eat into platinum supplies, which were in the seventh year of being in a surplus. World investment demand rose 12% in 2011 and was the engine of growth for platinum demand.
“The fact that platinum prices remained elevated over much of last year - enabling a new all-time high in annual average terms of $1,722 - was testament to broadly favorable investor sentiment,” Klapwijk said.
Fabrication demand rose nearly 7% to a three-year high on broad-based gains, including strong growth in Chinese jewelry demand following the sharp fall in prices toward the end of 2011. Retail investment rose strongly by the end of last year, led by sales in Japan as platinum traded beneath gold prices. Industrial use rose, with a 4% gain in platinum autocatalyst demand, the consultancy said. Industrial use was constrained by substitution of palladium for platinum, lackluster vehicle output in Europe and the twin nuclear and tsunami disasters in Japan. Despite the 4% rebound, “platinum autocatalyst demand remained considerably short of pre-recession levels,” they said.
Global platinum supplies rose last year by nearly 5% on a recovery in Canadian mine production as Vale’s operations returned to normal and mining increased at Lac des Iles. Recycling of platinum autocatalysts grew nearly 9%. The firm said that might have been greater had prices not fallen so heavily late in 2011. Jewelry scrap supply rose by 11% on the back of Japanese recycling on greater development of the country’s collection infrastructure.
PALLADIUM DEFICIT SLIMS
Subdued fabrication demand and a rise in supply allowed the palladium supply deficit to be cut nearly in half, to 313,000 ounces, or 9.7 metric tons, Thomson Reuters GFMS said.
Global fabrication demand rose 2% in 2011, which was an 11-year high. Palladium autocatalyst demand rose 5% - also an 11-year high – based on greater demand for gasoline applications and substitution-related gains at the expense of platinum. While autocatalyst demand was stout, weakness in jewelry demand, especially in China, fell to an eight-year low.
A 5% rise in supplies outweighed the modest rise in fabrication demand, which was a new record level, the firm said. Mine production expanded by 3%, along with a “robust” pickup in autocatalyst recycling. Palladium prices still reached an annual average record high of $734 in 2011 despite “substantial liquidations” from exchange-traded fund holdings and a reduction in long positions on futures markets, they said.
By Debbie Carlson of Kitco News
http://www.kitco.com/reports/KitcoNews20120503DeC.html
