Platinum Set for Shortage Next Year as Palladium Deficit Narrows

  • Johnson Matthey sees platinum usage growing, recycling rising
  • Shortfalls of the metals fell in 2015 as supply increased

Platinum demand will probably beat supply for a fifth year in 2016 on more industrial usage, even as recycling rebounds, according to Johnson Matthey Plc. Palladium’s deficit may narrow.

Automakers will buy more platinum to use in devices that curb harmful emissions from vehicles, though the growth rate will be slower than in the last two years, the London-based company said in a report. While slumping platinum and steel prices have reduced the incentive to scrap older cars this year, there may be a “double-digit” increase in the amount of metal recycled from vehicles in 2016, it said.

Even after years of deficits, prices are at the lowest since 2008 amid ample supplies of stored metal. This year’s shortage probably narrowed 35 percent after output rebounded following a five-month mine strike in top producer South Africa in 2014, the trader and researcher estimates. The increase in supply outweighed a 1.2 percent gain in demand.

“Assuming that increased recovery of platinum from scrapped vehicles is balanced by growth in autocatalysts and industrial demand, this would leave the market in deficit,” Johnson Matthey said in the report. “There is little prospect of material growth in primary platinum supplies in 2016.”

Supply Shortages

This year’s shortage will total 652,000 ounces, according to Johnson Matthey, which didn’t give a figure for the expected 2016 deficit. The largest South African output in four years will boost mine supply by 14 percent, while recycling is set to fall 13 percent.

Platinum slid 30 percent this year and traded at $846.95 an ounce in London on Wednesday. Palladium, also mostly used in pollution-control devices, has plunged 32 percent, and prices are near a five-year low set in August.

Palladium’s shortage is set to narrow 76 percent to 427,000 ounces this year on higher output from South Africa and sales by investors, the report showed. The market has been in deficit since 2012.

Demand from car companies, which probably increased 0.8 percent to a record this year, will rise “modestly” in 2016, the report showed. Scrap supply should climb “strongly” and there’s a potential for more sales from exchange-traded products, it said.

“We expect palladium demand in consuming applications to be stable or marginally higher,” the company said. “If we are correct about the prospect for a large increase in autocatalyst recycling, this suggests that the gap between supply and demand could narrow. The ultimate market balance will be dependent upon investment flows.”

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