UNITED STATES July 14 2016 11:34 AM

LONDON (Scrap Register): Citi research expects platinum to average $1,040 an ounce in 2017 and $1,120 an ounce in 2018.

Platinum and palladium supplies are forecast to be in deficit for this year, with the dollar platinum price averaging $985 an ounce this year. Platinum is likely to register a 172,000 ounce deficit with palladium short by 847,000 ounce.

For palladium, Citi expects $570 an ounce (up 7% from previous estimates), $640 an ounce (up 2%), and $690 an ounce (unchanged) in 2016, 17, and 18 respectively.

The bank remains fundamentally more bullish on palladium than platinum, medium to longer term.

The main reasons for a platinum deficit include South African supply growth remaining constrained near term and slowing growth in autocatalyst recycling combined with robust autocatalyst demand from Western Europe. Platinum is the key ingredient in diesel engine catalysts, palladium in gasoline. 

For palladium, autocatalyst growth in Asia will be key, in Citi's view, coupled with global demand for palladium in automobiles increasing nearly 3% to a record in 2016.