UNITED STATES June 12 2017 9:29 PM
NEW YORK (Scrap Register): Standard Chartered cited a potential for a short-term correction in palladium, which hit its highest price since 2001 on Friday, but also anticipates the market will remain “undersupplied” for a long time.
“The forward curve has moved into a steep backwardation in less than a week, while Nymex stocks have fallen to their lowest since 2003,” said Standard Chartered.
Analysts said much of the tightness in the market is materializing in ingot premiums (bar demand), but demand for sponge (primarily for industrial use) is also strong.
Feedback during Platinum Week indicated healthy demand for auto and industrial palladium consumption that resulted in smelting and refining capacity focusing on sponge rather than ingot.
Meanwhile, last year hefty net redemptions by physically backed exchange-traded products – totaling 637,000 ounces in 2016 -- boosted the supply of bars to the market. However, ETP outflows have slowed so far this year, analysts added.
Standard Chartered added “supply and demand dynamics suggest that the market is not only in deficit this year (minus 563,000 ounces) but – in the absence of Russian state stock releases and elevated auto-catalyst demand – is set to be undersupplied longer term.”