Platinum and palladium will return to the biggest shortages in at least a decade this year as strikes and safety stoppages in South Africa and falling sales from Russia cut supplies, Johnson Matthey Plc said.
Labor disputes in South Africa will help cut platinum output to the least since 2000 and leave the market short by 400,000 ounces, the most since 2002 and compared with last year’s surplus of 430,000 ounces, London-based Johnson Matthey said today in a report. Palladium supply will lag demand by 915,000 ounces, the most since 2000 and compared with 2011’s glut of 1.26 million ounces, on lower output from mines and stockpiles in Russia and record usage from automakers.
Unrest over pay erupted into fighting and deaths at Lonmin Plc’s Marikana mine and spread to other operations this year in South Africa, the largest platinum producer. Miners in Russia are extracting less palladium from rock at a time when state inventories are probably almost depleted, Johnson Matthey said. Manufacturers are using more of the metal in pollution-control devices as sales, particularly for gasoline models, increase.
“It’s unlikely that supplies of either platinum or palladium are going to rise,” Jonathan Butler, publications manager at Johnson Matthey, said in an interview in London. “We’re assuming that demand is going to remain robust for both metals. Overall, we’re positive on investment demand, that conditions will remain favorable.”
Platinum traded at $1,582.25 an ounce by 2:11 p.m. in London for a 13 percent advance this year. It will average $1,625 in the next six months, trading between $1,400 and $1,800, Johnson Matthey said. Palladium, at $616.50 an ounce, will average $650 in the period, remaining above $550 and climbing as high as $750. It’s fallen 5.9 percent in 2012.
The metals’ performance this year compares with a 2.2 percent decline for the Standard & Poor’s GSCI gauge of 24 commodities and a 7.4 percent advance for the MSCI All-Country World Index of equities. Treasuries returned 2.7 percent this year, a Bank of America Corp. index shows.
Platinum supply will drop 9.9 percent to 5.84 million ounces on a 12 percent slide in South Africa, which will account for 73 percent of global output, according to the report. In May, the company had forecast a surplus this year. Palladium supply is expected to drop 11 percent to 6.57 million ounces as mine output slips 6.3 percent in South Africa and 3.9 percent in Russia, the biggest producer of the metal.
Palladium sales from Russian inventories, a state secret, will slip 68 percent to 250,000 ounces this year and will account for most of the remaining reserves, Johnson Matthey said. Recycling, adding to supply, will fall 11 percent to 1.83 million ounces of platinum this year and slip 4.5 percent to 2.24 million ounces of palladium, the company forecast.
“Assuming we do see sustained higher prices during 2013, we could well see an uptick in recycling as metal that’s been held onto this year comes back to the market,” Butler said.
There may be 200,000 to 300,000 ounces of platinum and the same amount of palladium in stockpiles from old autocatalysts, Lucy Bloxham, a senior market analyst at Johnson Matthey, said in a presentation in London today. That metal would eventually come back to the market through recycling, she said.
A 9.9 percent jump in platinum jewelry usage and purchases through exchange-traded products will cut the drop in overall demand this year to 0.3 percent, the report showed. The amount used in engine-based machinery not designed for roads will total 130,000 ounces, Johnson Matthey said. Traditional autocatalyst consumption will fall 1.1 percent to 3.07 million ounces of platinum as declines in Europe outweigh gains in China, Japan and other emerging nations, the report showed.
The canisters have honeycomb-like surfaces converting emissions into less harmful substances. Carmakers typically use more palladium for gasoline engines and more platinum for diesel types. They’ll raise the amount of palladium used in the devices this year by 7.5 percent to a record 6.48 million ounces, said Johnson Matthey, the maker of one in three autocatalysts.
“For palladium, we see some further growth in autocatalyst demand,” Butler said. “Technology changes next year driven by environmental legislation are expected to result in some additional demand for platinum in Europe, despite the weakness in the European car market.”
Electrical demand for palladium will slide 12 percent to 1.21 million ounces and jewelry buying will drop 11 percent to 450,000 ounces, the researcher said. Investors will add 385,000 ounces this year, compared with sales of 565,000 ounces in 2011. Platinum investment will rise 30,000 ounces to 490,000 ounces.
Rhodium will move to a 43,000-ounce shortage, the most since 2005, from last year’s 139,000-ounce glut, on lower supply from South Africa and more demand from vehicle manufacturers, Johnson Matthey said. The commodity is mainly used in catalytic converters and also in the chemical and glass industries. It’s down 18 percent this year at $1,150 an ounce, according to Johnson Matthey prices on Bloomberg.
Ruthenium consumption will slip 20 percent to a three-year low of 770,000 ounces as chemical purchases slow. It’s mostly used for coating computer hard disks. Demand for iridium, used in spark plugs and for growing metal oxide crystals, will slump 35 percent to a three-year low of 218,000 ounces, it said.