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Recovering auto production revs up platinum, palladium prices

Rising auto production as vehicle makers tentatively recover from the coronavirus shock will lift prices of platinum and palladium, but both metals used in vehicle exhausts will struggle to score significant gains, a Reuters poll showed.


Palladium, which hit a record high of $2,875.50 an ounce in February and now trades around $2,300, will average $2,188 this year and $2,317 in 2021, supported by supply shortages, according to the median responses of 32 analysts and traders.


Platinum, which in March touched $558 an ounce, its lowest since 2002, now trades at around $870, and could flip into deficit. It is expected to average $876 this year and $950 an ounce in 2021.


That means platinum could this year snap an eight-year run of falling average prices and palladium will see its fourth and fifth consecutive annual gains.


Graphic: Platinum falls, palladium rises


Reuters Graphic


“Rebounding auto sales, tight mine supply and little indication of new sources of supply have helped palladium rise,” said ETFS Capital analyst Nitesh Shah. “Continued tightness could see record prices regained.”


Of the analysts who forecast supply and demand, four said palladium would remain in deficit and one said the market would be balanced.


Around 80% of palladium in consumed in vehicle exhausts, where it neutralises harmful emissions. Platinum is also used for this, although more for diesel vehicles, which have lost market share.


Platinum is also used in jewellery and bought as an investment.


Three analysts forecast platinum would remain in surplus and two predicted deficits. The tightening so far has mainly been due to investors buying exchange traded funds (ETFs) backed with platinum bars.


“The supply-demand balance needs to tighten without ETF inflows to recapture the $1000/oz (level) on a sustained basis,” said Standard Chartered analyst Suki Cooper. “We believe (this) is likely towards the end of next year.”


A similar Reuters poll three months ago returned forecasts for palladium to average $2,050 an ounce this year and $2,138 in 2021. For platinum the averages were $832 this year and $913 in 2021.


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