PGM price risks amid sizeable market deficits: Barclays

UNITED STATES March 03 2015 11:09 AM

NEW YORK (Scrap Register): As PGM prices have stabilised and edged higher, fundamental developments pose downside risks to prices amid markets that look set to deliver sizeable deficits.

The latest Swiss trade data show palladium shipments from Russia in January had the strongest start to a year since 2010. This is the largest shipment since May but a pick-up in the winter months is not uncommon and despite this, the market remains in deficit. Separately, Impala’s strategic review highlights sound longer-term fundamentals but suggests that prices are likely to remain lower for longer.

Small price rises, led by palladium, have masked a number of fundamental developments over the past week that bode well for gold but highlight potential downside risks for the PGMs.

First, the latest Swiss trade data show a pickup in palladium shipments from Russia. Second, Impala Platinum’s strategic review underscores that prices are likely to be lower for longer although fundamentals are sound longer term and third, the Hong Kong trade data show a rebound in gold shipments to China.

The latest Swiss trade data show palladium shipments of 21.6koz from Russia were the strongest since May last year (49koz) and this was the strongest start to any year since 2010. This shipment is more than three times the average run rate of the past year (around 6koz) and notably it is a pick-up in powder as opposed to semi-manufactured imports which has accounted for the bulk of shipments in recent months. The increase in shipments in April and May last year were also in powder form.

A pick-up in the winter months is not uncommon but in absolute terms the volumes are still light, and do not swing our forecast for a sizeable deficit in 2015 (558koz). Of note, platinum imports fell by 80% y/y to 29.1koz, primarily driven by a decline in shipments from South Africa.