UNITED STATES May 24 2017 10:33 AM
LONDON (Scrap Register): Standard Chartered looks for the palladium market to be in a supply deficit this year while platinum is nearly balanced; still, analysts said any move in palladium prices to the same level as platinum – should one occur – likely would be only temporary.
Analysts now look for a palladium supply deficit this year of 563,000 ounces, compared to 459,000 previously.
Standard Chartered said it expects the platinum market to be “mostly balanced,” revising its forecast to a surplus of 63,000 ounces from a deficit of 42,000 previously.
“Barring short-term weakness, Standard Chartered expects palladium prices to scale their highest levels since 2014 over the next 12 months and expect platinum prices to find support on dips towards $900 an ounce; we would view such lows as good entry levels for long positions,” said analysts at Standard Chartered.
However, any parity between platinum and palladium is likely to be temporary, given the absence of a structural shift in dynamics supporting palladium’s premium.
If there is a repeat of the early 2000s, when palladium moved than platinum, this is likely to occur due to temporary weakness in platinum and a surge in palladium prices, said Standard Chartered.
Thus Standard Chartered envisages prices meeting below 900 an ounce, rather than above 1,000 an ounce.
While Standard Chartered is positive on the outlook for both metals longer term, for palladium to trade above $1,000/oz requires incremental and sustained tightening in the market.
Their base-case forecast suggests parity is likely to be a temporary phenomenon rather than a structural shift in the market, and market dynamics are not nimble enough to trigger an immediate demand response.
Indeed, Standard Chartered believes it would take two to three years for an auto-catalyst to be reconfigured.