Platinum, palladium shortage most in a decade on supply drop

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 Price

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.