Topics in this section: - Palladium demand thwarts dollar drag as platinum surplus remains - Gold may outshine palladium, platinum on dollar dip, trade wars - Platinum-market surplus, weak China autos may halt price rebound - Price dips could entice investment, jewelry buying - Palladium market stays undersupplied, lures substitution, scraps - Platinum has opportunities to catalyze market, reality may bite - Auto industry is slowing driver of platinum, palladium, rhodium - Diversification cuts nornickel platinum-palladium price exposure - Africa's 'magnificent seven' platinum domination is here to stay
Further demand growth could support the palladium price in 2019, in our view, while the platinum price is likely to remain vulnerable to China's slowing economy, potential dollar strength and an increase in supply vs. the prior year. Platinum and rhodium markets will likely have been in surplus at the end of 2018, but palladium will have remained in deficit, we believe. Yet there are signs of potential restocking, particularly from China and automakers. The average platinum price slid 7% in 2018, while palladium rose 18% and rhodium doubled after lower prices and reduced stockpiles encouraged bargain hunting.
Gold may outshine palladium, platinum on dollar dip, trade wars
Gold's safe-haven appeal may enable the yellow metal to outshine palladium and platinum-group metals, in our view, with better sentiment spurred by dollar weakness, global economic-growth-outlook uncertainty and as more central banks lower interest rates. The lack of trade-war resolution between the U.S. and China would make this particularly true. We believe that palladium could still benefit from better fundamentals in 2019-20, as higher demand tightens global supply. The platinum market's surplus at the end of the year could pressure the metal's price recovery, but likely ensuing bargain hunting would limit any downside.
Platinum-market surplus, weak China autos may halt price rebound
Weaker platinum demand is likely to result in another market surplus this year, in our view, given lower Chinese autos sales, and a potential global economic slowdown amid U.S.-China trade tensions. We believe that rising supply from mines and scrap may also dent sentiment and any price recovery.
Price dips could entice investment, jewelry buying
The trend of declining global platinum-jewelry purchases and destocking of old pieces (such as heavier plain conventional items) could reverse in 2019, in our view, if metal-price weakness is sustained in 2H. Worldwide jewelry consumption could fall 3% in 2019 to 2.1 million ounces, similar to 2018's decline, based on Metals Focus data. Fewer Chinese jewelry purchases likely more than offset a total recovery in volume from Europe, India, Japan and North America this year. Scrap flows from jewelry could decrease by 8% in 2019 to 463,000 ounces on lower amounts from China and Japan, due to weakness in platinum prices since 2018. Platinum investment is expected to slide 15% to 332,000 ounces, according to Metals Focus. This could lead to platinum underperforming vs. gold and palladium, though it could trigger bargain hunting.
Palladium market stays undersupplied, lures substitution, scraps
Palladium's superior market fundamentals are likely to remain in 2019, but we see substitution risks and rising supply from mine-production and recycling volume in the short to midterm. Autocatalyst demand may rise, though nonautomotive buying may dip because of higher prices.
Platinum has opportunities to catalyze market, reality may bite
A recovery in auto purchases, palladium substitution and fuel-cell growth may boost future platinum demand. The metal could gain from new Indian consumer segments, higher Japanese jewelry market share and purchases by Chinese investors. Challenges include marketing, slow jewelry conversion from gold and platinum-price volatility, amid a global economic slowdown, in our view.
Auto industry is slowing driver of platinum, palladium, rhodium
The platinum, palladium and rhodium industry's No. 1 driver is the auto segment, where global growth uncertainty and China's slowdown -- amid U.S.-China trade-war tensions -- are dulling prospects. Our 40-year study shows that auto demand for catalytic converters and secondary supply (recycling) is key for the metals.
Diversification cuts nornickel platinum-palladium price exposure
Norilsk Nickel is the least-exposed to platinum among the world's top eight producers of the metal, and second for palladium in the 12-month period to May 24, based on our beta analysis. We found that North American Palladium Ltd.'s price-sensitivity to palladium is greatest thanks to higher output at its Lac des Iles mine.
Africa's 'magnificent seven' platinum domination is here to stay
Africa's top seven platinum miners -- Impala, Amplats, Sibanye, Lonmin, Northam, Royal Bafokeng and African Rainbow -- should continue to dominate global supply, in our view, with 2019-20 earnings likely to get a lift from palladium-price exposure and rand depreciation vs. the dollar -- particularly if the platinum price remains weak.
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