Stillwater Mining Company, the only producer of palladium and platinum has published the results of an independent study entitled- “The Case for Palladium” which concludes that, “a fundamental palladium market deficit potentially lies directly ahead which will leave incremental palladium supply reliant on existing stocks, recycling supply… and still [will fall] short of meeting demand.” Among the factors cited in support of that view are the following:
— Platinum and palladium remain scarce commodities with very limited prospects for supply growth;
— South African production, key to global supply, faces impending severe operating and growth constraints;
— Car build and PGM catalyst loadings are both now growing again after a steep downturn in 2009;
— New palladium and platinum Exchange Traded Funds have increased retail demand for PGMs;
— Russian state inventories of palladium that historically have overhung the market now appear to be fully depleted or nearly so;
— Interchangeability of platinum and palladium in catalytic converters favors palladium at current prices; and
— PGM recycling volumes, although growing, are insufficient to offset supply shortages.
The study also notes the following-
• Bloomberg quoted Neville Nicholau, the chief executive officer of Anglo Platinum Ltd. – the largest South African PGM producer – noting, “Palladium may be in deficit for most of the next decade as Russia depletes inventories and uses for the metal increase.” Anglo Platinum produces 21 percent of the world’s palladium output.
• Similarly, Derek Engelbrecht, marketing group executive of Impala Platinum, in February of this year commented that he expected the palladium market to swing from a surplus of 305,000 ounces in 2009 to a deficit of 810,000 ounces in 2010. He also projected that the palladium price could double over the next five years.
• And the president of Audi America, Johan de Nysschen, was quoted in Automotive News on Tuesday as saying the carmaker is “short of everything” in the U.S., referring to a sharp rebound in 2010 auto sales. Commenting on this remark, Automotive News noted, “…one of our strongest convictions this year is for a rebound in auto-related PGM demand as worldwide vehicle production rises, forcing a restocking of the metal inventories run down in 2009. The Audi comments reinforce our view that there is limited excess supply in the system: with inventories low, returning U.S. auto demand this year had caused a much greater production response. U.S. car and truck production year to date (April 10) is up 63.4% from a year earlier. Given that the U.S. is primarily a gasoline market, this is good news mainly for palladium, but platinum also reaps some benefits from the heavy-duty sector.”
Additional Resources: (1) Critical Metals Markets for Passive Components: 2007-2011 ISBN # 0-929717-38-4 (2007)