We now bring you the excellent report by Standard Bank’s Marc Ground on the subject of platinum and palladium – through the lens of Swiss import/export flows – published this morning. Those of you who follow these markets closely (and we know you are out there in large numbers) will find this in-depth analysis quite valuable – which is why it appears here in its entirety. Take it away, Mr. Ground:
“This week’s release of Swiss Customs data for January indicates an improving outlook for both platinum and palladium demand. However, as has been the case throughout H2:10, the demand picture for palladium still appears stronger. Switzerland remains a net importer of platinum, with 24,011 oz flowing into the country during January. Off the back of December’s dramatic 163k oz of net imports, this continues the trend of net inflows into Zurich seen since August 2010 (there was a brief interruption in November 2010, with exports of 55k oz). The November figure was elevated by significant flows to the UK for Loco London settlements (94k oz); however, these flows have once again dropped off, with the last two months showing a 62 oz of net imports and only 248 oz of net exports.
“Chinese demand for platinum from Switzerland, although relatively lacklustre, did see a slight pick-up in January. 28k oz moved to China, up from the previous month’s 19k oz, but still below the 2010 average of 50k oz. The slowdown seen in Q4:10 platinum demand from China can be largely attributed to reduced jewellery demand in response to higher platinum prices. The fact that China’s net imports rose considerably (49k oz) in November 2010 as prices weakened, reaffirms this view. Nevertheless, we believe that jewellery demand will continue to gain momentum into 2011.
“We also note that Swiss Customs Data is only indicative and not necessarily representative of Chinese physical demand for platinum. China’s Customs figures for January (released this morning), although down 18% m/m, are still well above the 2010 monthly average and up 24% y/y, indicating relatively strong demand for platinum. After being an net exporter during H2:10, Germany posted a minimal 1.4k oz of net imports in January. While it is too early to confirm this as a trend, should this continue, it would bode well for platinum from an auto sector demand perspective.
“Switzerland continued for the 9th straight months as a net exporter of palladium (290k) during January. The figure was considerably higher than the 2010 average of 91k net exports and marks the highest level since July 2010. However, it is important to note that a large part of this is metal flowing to London vaults.
“China’s demand for palladium from Switzerland remains weak. In January, China imported only 124 oz, continuing the downward trend in demand. Once again, the negative effect of high prices is largely to blame. Although China’s Customs data reveals a 13% m/m drop, imports were up 57% y/y and well above average levels. Consequently, we could see even greater appetite for palladium after the recent drop in prices.”