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Bearish aura pervades London Platinum Week

http://www.chemnet.com   May 17,2017 Platts
The mood was distinctly bearish among attendees at London Platinum Week 2017, with representatives from across the value chain painting a negative outlook for the autocatalyst metal.

"[For the time being] people do not hate [platinum], but at $1,000 they will hate it again," said a fund manager Monday evening.

A senior banking source said: "The mood is overall bearish."

Diverging outlooks on supply and demand dynamics were circulating among participants at the event.

Johnson Matthey, the world's largest refiner of platinum and palladium, expects to see a supply surplus in 2017, the first in six years.

The company also sees falling jewellery demand for the metals as Chinese manufacturers look set to turn increasingly to gold.

"The envisaged surplus is quite sizable at 302,000 oz. Last year saw a deficit of 202,000 oz...The main reason for the anticipated surplus is weaker demand (minus 9.5%) -- because of new standards, less platinum is being used in diesel auto-catalysts," Germany's Commerzbank said in reaction to Johnson Matthey's forecasts.

This contrasted with predictions from the World Platinum Investment Council and Thomson Reuters GFMS.

Ross Strachan, precious metals demand manager at Thomson Reuters, said: "Platinum has been the worst performing precious metal in the year to date, continuing a pretty underwhelming performance in 2016. We do not expect it to continue to lag its peers substantially as the market has priced in much of the bad news...We are looking for a fundamental deficit this year as mine production continues to be hindered by the lack of investment in earlier years."

Industry lobby group WPIC said Monday that overall platinum supply was forecast to fall 2% year on year to 7.73 million oz in 2017, with both primary and secondary supply expected to decline.

Total demand in 2017 is projected at 7.795 million oz, WPIC said.

Recycling is projected to fall by 6% to 1.76 million oz.

"This quarter's report reinforces our long-held view that supply will become increasingly constrained in 2017, while revisions to the data show that 2016 was more heavily in deficit than previously detailed," WPIC CEO Paul Wilson said.

One senior industry source struck a negative tone: "Diesel passenger vehicles are unsaleable...and with the stock of metal driving around Europe -- and soon to be recycled -- diesel could conceivably become a net source of supply of platinum, not demand."

"Also cheap platinum has damaged -- perhaps fatally -- the platinum jewellery brand in China," he added. "The two big drivers for platinum have stalled so I can't be anything other than negative."

JP Morgan's technical analysts, however, were less downbeat, issuing a "buy platinum" recommendation in anticipation of a minimum rally to $1,050/oz.

Platinum was spot bid as of 1000 GMT at $931/oz.
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