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Parity between Platinum, Palladium Prices Coming, But Not Yet

Reuters – Parity between platinum and palladium prices is on the way as the latter metal’s market deficit breaches a million ounces a year, GFMS recently said – but it won’t be seen just yet.

Weakening supply from South Africa mines will likely push platinum prices back above $1,000 an ounce this year, the team at Thomson Reuters said in their Platinum Group Metals Survey 2017, predicting strong growth in last year’s small deficit.

That will help put more ground between platinum and palladium prices, which recently came within $100 of one another – their closest in 15 years. However, a rebound in the ratio will likely only be temporary, it said. “In our view, it is more a case of when, not if, the palladium price will exceed platinum for the first time since 2001,” GFMS analyst Ross Strachan said. “However, we think that the recent move has been too far and too fast,” he said. ”Platinum is set to rally to be above $1,000 an ounce this year on the back of weak mine output.” Platinum is expected to post a shortfall of 367,000 ounces this year, up from 192,000 in 2016. It saw little change in its overall supply and demand balance in 2016, GFMS said, though the shape of its underlying fundamentals shifted.

A sharp drop in jewellery buying, driven largely by leading market China, was balanced by a rise in industrial ad, to a lesser extent, autocatalyst demand last year, it said, with offtake by the glass and petroleum industries particularly firm.

Platinum mine output fell 2 percent, driven by lower output from South Africa’s five biggest operations, though Chinese jewellery scrap selling rose 15 percent to a record high as slow-moving stock was remelted. Palladium prices are expected to rise above $850 an ounce well before year-end, GFMS said.

The metal is expected to remain in deficit after posting a market shortfall of 1.2 million ounces last year. Palladium mine production fell 2 percent as a rise in Zimbabwean and U.S. operations failed to offset declines elsewhere.

That was partly balanced by a rise in scrap flows, with autocatalyst scrap climbing to its second highest ever at 1.72 million ounces.

Palladium autocatalyst demand hit a fifth successive record high last year, at 7.36 million ounces, driven by strong sales in China and increased gasoline market share in Europe.

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