The rally in palladium, last year's star performer among precious metals, is tipped to lose steam in the years to come as appetite for the metal abates after its surge to record highs, a Reuters poll showed on Thursday. The poll of 28 analysts and traders conducted this month returned an average palladium price view of $1,039 an ounce for 2018, and of $1,040 for next year.
While both years would constitute its strongest on record, year-on-year growth would be minimal. "We forecast demand growth in palladium to moderate in 2018 after two years of strong growth driven by autocatalyst demand," Deutsche Bank analyst Nicholas Snowdon said. "While we forecast autocat growth to continue, other elements of industrial demand are likely to decline in response to higher prices."
"We expect that 2018 could be the year of peak palladium prices in the foreseeable future as market deficits begin to decline." Palladium reached an intraday all-time high of $1,138 an ounce in January. Platinum is expected to maintain its historically unusual discount to palladium through to next year, the poll showed, with respondents returning a platinum forecast for 2018 of $983 an ounce, more than 5 percent below that of its sister metal.
Platinum prices moved below those of palladium in October for the first time since 2001. The metal has maintained an average discount to palladium of $54 an ounce so far this year, compared to an average premium over the last 25 years of $478. Both metals are primarily used in autocatalysts, but a heavier loading of platinum is used in diesel vehicles, which have lost market share since the "dieselgate" scandal of 2015.
"Platinum continues to face headwinds from the diesel emission scandal," Julius Baer analyst Carsten Menke said. "The share of newly sold diesel cars in Europe's five biggest markets kept on falling during the first quarter." "News flow remained negative as Germany's Federal Administrative Court allowed city-centre driving bans of older diesel-fuelled cars as a means to meet European air quality standards. Consumers' concerns about the diesel technology should thus prevail."
As well as jitters over automotive consumption, platinum has suffered from weakness in its other major demand source, the jewellery market, with buying in top consumer China falling sharply. Palladium is more heavily used than platinum in gasoline engines, including those used in increasingly popular hybrid vehicles. It also reacted positively this month to the threat of US sanctions on Russian entities which it was feared could curb mine supply, 41 percent of which comes from Russia.