VM Revises Platinum, Palladium Estimates

Source: The Wall Street Journal, Rhiannon Hoyle (5/23/11)

"Strong demand expected from the jewelry and industrial sectors."

The Wall Street Journal, Rhiannon Hoyle

Strong demand for platinum from the jewelry and industrial sectors will likely result in a smaller-than-expected surplus in 2011, while supply uncertainty and growing demand from autocatalyst makers is expected to push palladium deeper into deficit, VM Group said as it revised its market balances for the two commodities.

The research organization said it now expects platinum to record a 210,000-troy-ounce surplus this year, a much tighter balance than its earlier estimate of 375 Koz..

It is also forecasting a wider deficit for palladium at 378 Koz., from an earlier estimate of just 25 Koz..

Autocatalyst demand, particularly for palladium, will be a key area of consumption this year, VM Group said Monday in a monthly report.

"Palladium and platinum demand from the automotive industry has improved over the past year and is expected to continue to grow year-on-year in 2011," the group said.

It forecast platinum demand for use in autocatalysts to rise to 3.285 Moz., from 3.123 Moz. last year. For palladium, it forecast autocatalyst demand of 5.720 Moz., from 5.214 Moz. in 2010.

In the platinum market, jewelry and other industrial demand will be important for tightening the balance as well.

While mine supply for both palladium and platinum has the potential to rise in 2011, there should be plenty of headwinds in the coming months, especially for palladium.

"The biggest producer, South Africa, remains a risky supplier for many reasons—wage disputes, safety stoppages, the pressure on margins due to the strong rand and, more critically, the constant threat of power outages. Zimbabwean supply is also in question as never before," VM Group said.

Investment-related buying will, however, "be critical in determining final end-2011 market balances," it said in the report.

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