While demand from carmakers for both metals will advance next year, improving mine output will ease shortages. The platinum deficit will decline 59% to 239,000 ounces and that in palladium will narrow 16% to 686,000 ounces, according to Barclays. Primary supply will expand 0.4% for palladium and 2.1% for platinum, the bank says.
There are still existing stockpiles that can be tapped should mines be disrupted by strikes or natural disasters. About 80,000 ounces of platinum output was lost through such events this year, Deutsche Bank AG says. Inventories held at factories or in ETPs are equal to 1,000 days of platinum consumption and 880 days for palladium, Standard Bank Group Ltd. estimates.
South Africa and Russia account for 86% of platinum production and 80% of palladium output, according to Barclays. Primary platinum supply will rise to 5.7 million ounces next year, still less than the 6.49 million ounces in 2011, the bank says. Palladium will increase to 6.5 million ounces in 2014, below 2011’s 7.36 million ounces. Both figures exclude material from recycling.
The threat of strikes that South Africa’s government says cost mining companies as much as 15 billion rand ($1.5 billion) in revenue last year still exists. Anglo American Platinum Ltd. workers went on strike for two weeks from Sept. 27, cutting 44,000 ounces of platinum output.
Amplats, as the biggest producer is known, will report a loss of 962.4 million rand this year, after losing a record 6.7 billion rand in 2012, according to the mean of seven analyst estimates compiled by Bloomberg. Shares of the Johannesburg- based company fell 5.8% this year.
Hedge funds and other speculators raised bullish bets on palladium by 31% to 22,042 contracts this year through Sept. 24, U.S. Commodity Futures Trading Commission data show. Wagers on higher platinum prices jumped 69% from a 10- month low set in July. The CFTC hasn’t released figures this month due to a partial government shutdown that ended Oct. 17.
“They are the quintessential industrial-precious metals,” said Bart Melek, the head of commodity strategy at TD Securities Inc. in Toronto and the third-most accurate precious metals analyst over the past two years. “Industrial demand is key in driving prices. The big incremental moves will come from the demand side. If we get a firmer economic recovery continuing then this will bode well for industrial-precious metals.”