Inventories And Stockpiles To Keep PGM Prices In Check In 2015 – CPM Group

By Paul Ploumis 24 Jun 2015 Last updated at 07:38:02 GMT

(Kitco News) - One research firm is not expecting to see a turnaround in platinum group metals (PGM) in 2015 as platinum prices remain near six-year lows and palladium hovers at a one-year low.

Tuesday CPM Group, released its Platinum Group Metals Yearbook for 2015, noting some of the major highlights in the past year. Looking ahead, they note that significant stockpiles will continue to weigh on prices in 2015.

“It is clear that investors and other market participants have been selling metal from inventories in 2014 and the first half of 2015…” the firm said in a press release. “Any significant increase in prices may be limited to some degree by continued sales from these inventories.

“Even the longest and most severe labor strikes in South Africa’s platinum mining industry could not support platinum prices during 2014, as a combination of weak fabrication demand and sales from large above ground inventories built up in previous years sent prices lower,” the analysts said in the report.

CPM Group noted that the labor issues in South Africa caused significant withdraws from above-ground stockpiles; however, inventories still remain above levels prior to 2009.

While inventories helped to cap prices on the supply side of the market, CMP Group also noted that demand has been lackluster. The firm said that platinum fabrication declined to 7.02 million ounces in 2014, down 2.8% from 2013; the firm also noted that this was the second straight year of declining demand.

“Platinum fabrication demand during 2014 was the lowest since 2010. Demand was driven lower by weaker consumption of platinum jewelry and reduced demand from the auto sector,” the report said.

Platinum is a key component mostly in diesel engines and CMP said that last year Auto sector demand declined to 3.13 million ounces. The only auto markets to see an increase in platinum demand was in North American, Europe and Japan. “Platinum use in all other regions and countries declined 25%,” the report said.

The report highlighted falling demand in Russia, Brazil, and India, in particular.

Another drag on platinum, according to CPM Group, is weakening jewelry demand. The report noted that platinum jewelry demand dropped for the second straight year because of low interest in China and Japan, “which account for around 90% of platinum jewelry demand.”

Although palladium prices managed to see a positive return in 2014, CPM Group said the precious metal saw a drop in net investment demand.

“The decline reflected some investors selling palladium from their unreported inventories as they took profits derived from the strong prices during 2014 and reduced concerns regarding mine supply from both South Africa and Russia during the second half of the year,” the report said.

CMP Group is a little bit more positive on palladium as the metal has seen some renewed demand and declining supplies. The firm said that in 2014 supply declined 1.4% from the previous year, to 9 million ounces; however, demand rose for the fifth consecutive year to 9.02 million ounces, up 2.5% from 2013.

“Strong palladium demand growth from the auto and electronics sectors helped push prices higher during 2014. Fabrication demand for palladium is forecast to continue rising during 2015, albeit at a slower pace than that seen in recent years,” the firm said.

Courtesy: Kitco News