Palladium Shortage Surged to 11 Year-High in 2012, GFMS Says

Palladium’s deficit rose to the biggest in 11 years in 2012 as strike action in South African mines curbed supply and demand expanded, Thomson Reuters GFMS said. Platinum slipped into a deficit for the first time since 2004.

Palladium supply fell 4 percent to 8.19 million ounces as usage expanded 5 percent to 9.32 million ounces, the highest on record, the London-based researcher said today in a report. Excluding sales from Russian state stocks and investor selling, demand outstripped supply by 1.12 million ounces, the biggest gap since the 1.3 million-ounce shortfall in 2001, GFMS said.

Both metals are mostly used in vehicle pollution-control devices and jewelry, with palladium favored mainly for gasoline-burning engines in the U.S. and Asia and platinum for diesels in Europe. This year “may mark the end” to sales from Russian government inventories, a state secret, after deliveries halved last year, GFMS predicted. The global economy will grow 3.3 percent in 2013, from 3.2 percent in 2012, according to the International Monetary Fund.

“Constrained supply should maintain positive investor sentiment and allow prices to lift marginally,” William Tankard, a research director at GFMS said in a telephone interview yesterday.

Palladium for immediate delivery fell 1.8 percent this year to $691.07 an ounce by 2:28 p.m. in London today. It will trade between $660 and $800 by the end of the year and will average $725 an ounce, GFMS said. Platinum, down 3.1 percent to $1,491.60 an ounce this year, will trade between $1,375 and $1,750 by December and average $1,600, the report showed.

Russian Stockpiles

Sales from Russian palladium stockpiles may halve again this year to 200,000 ounces before ceasing from 2014, Tankard said. Deliveries fell to 400,000 ounces in 2012, from 800,000 ounces a year earlier, according to GFMS.

Palladium will see another “sizable deficit” in 2013 of between 800,000 and 900,000 ounces, Tankard said. Last year’s shortage widened from 279,000 ounces in 2011 on supply decline driven by a 10 percent drop in South Africa and as Russian output fell 3 percent.

Production will rise “only marginally” this year as South African output remains “stifled,” while auto companies will drive demand increase, according to GFMS. Autocatalyst demand surged 9 percent last year as jewelry usage shrank 4 percent.

Platinum demand outpaced supply by 83,000 ounces in 2012, from a 803,000-ounce surplus a year earlier. Supply slumped 10 percent to 7.1 million ounces on output disruptions in top producer South Africa, GFMS said. Refined output fell 12 percent to the lowest since 2001, according to the researcher.

Scrap Recycling

The market will post a surplus of about 100,000 ounces this year, Tankard said. Global output will increase by 2 percent as autocatalyst scrap recycling exceeds 1 million ounces for the first time, while South African output remains restrained, GFMS said.

Platinum consumption rose 1 percent to 7.19 million ounces last year as jewelry demand expanded 9 percent, GFMS said. The metal’s use in vehicles fell 4 percent affected by “weakness” in the European automotive industry and rising substitution by cheaper palladium, the researcher said. Investors bought 237,000 ounces, compared with 145,000 ounces in 2011.

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To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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