Palladium is being hailed as the best bet for gains among the precious metals this year due to stronger demand from automakers in China and the United States, a Reuters poll showed recently. By contrast, confidence in platinum prices weakened after a slow first quarter, despite continued supply issues in major producer South Africa.
A survey of 26 analysts, traders and fund managers yielded a median palladium price forecast of $750, up from a price view of $745 in a similar poll conducted in January and from last year's average of $641. The forecast also tops the 2011 record yearly average of $730.
In 2014, palladium is expected to extend gains once again to reach an average price of $827.50. That compares with its record high of $1,095 on January 11, 2001. Palladium is used in catalytic converters to clean exhaust emissions of gasoline-powered vehicles, the predominant auto fuel used in China and the United States. Palladium swung to a deficit of 2 million ounces in 2012 on lower supplies, higher gross demand and less recycling, according to estimates by Johnson Matthey.
Consumption in the world's big gasoline-powered car markets including the United States and China continued to grow in the first quarter, while strategic sales by top producer Russia seemed to drying up, analysts said "It's to do with stronger auto demand in China and the United States and also Russian state stocks, which have been for a long time a problem for the palladium market, but they now seem largely exhausted," Macquarie analyst Matthew Turner said. The platinum price is expected to average $1,683.50 this year, down by $16.50 from January's price view but above the 2012 average of $1,546.
The metal, which is used in catalytic converters for diesel-powered engines, relies more heavily on the European car market, which is flagging due to the euro zone's debt issues. European demand for new cars fell nearly 10 percent in the first quarter, according to figures from auto industry association ACEA. Platinum supply is vulnerable to supply cuts from South Africa, where output from some miners has fallen sharply over the past year because of industrial action and self-imposed stoppages.
But a plan by top producer Anglo American Platinum to mothball two mines and sell another, cutting 400,000 ounces of platinum supply, had a limited effect on prices, which have still fallen 6.3 percent so far this year. "There is an unremittingly gloomy picture for platinum demand among European automobile manufacturers," Natixis said in a note.