Platinum, Palladium Inventory Movements


"Standard Bank sees further price strength in platinum."

Standard Bank (SB) analyzed the movement of platinum and palladium into and out of Switzerland—the global hub for these metals—last week. Switzerland was a net exporter of 336,291 oz. of platinum in Ma. This is the largest net export number for Switzerland in more than two years, indicating a strong demand due to the lower platinum price. The main destination of exports was the UK (140,059 oz.), China and HK (140,556 oz.) and Germany (52,844 oz.).

Most exports to the UK appear to be sponge, which signals industrial demand—not ETF-related flows, which is confirmed by largely unchanged ETF holdings during the month. SB believes platinum has shifted to the UK for Loco London settlement on the London Bullion Market.

In May, China imported the most platinum from Switzerland since Feb 2009. China's platinum imports have steadily declined since Feb 2009, reaching only 16,800 oz. in April 2010. China being back in the market now suggests three issues:
  • China is price sensitive and has proved to be a buyer when prices drop.
  • For China to be buying now suggests they see current prices as good value—previously they were buying when platinum was ~$1,050 oz.
  • Last, China demand supports the bank's own cost curve model which shows platinum is good value below $1,500/oz.
The figures are a little different for palladium. Although Switzerland was again a net exporter in May at 170,000 oz., and the UK was a large importer at 188,000 oz., China was largely absent in Swiss export figures, suggesting demand is relatively weak at current prices. Indeed China has now been a net exporter of palladium to Switzerland since Dec 2009. Like platinum, most palladium exports to the UK appear to be sponge, signaling industrial demand—not ETF-related flows. SB sees these movements, taken in isolation, as supportive of further price strength in platinum but neutral for palladium.

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