While sentiment towards has weakened over the past five years, palladium fundamentals have strengthened significantly. Palladium is principally used to clean exhaust emissions in gasoline vehicles, which experienced strong sales growth over the period. Platinum, on the other hand, has lost market share to palladium in this key application, based on a lower palladium price and more diversified global supply. Platinum also experienced lower jewellery demand recently from the key Chinese market.
Impact on value
Supply/demand fundamentals have a direct impact on metal prices and market sentiment, which has resulted in platinum prices remaining relatively subdued over the past five years, with palladium prices growing strongly over the same period, particularly more recently. The potential for prolonged, relatively flat platinum prices remains strong, while palladium, already in an unsustainable deficit, should continue to receive strong price support, ultimately incentivising a switch back to platinum use in the auto sector.
Flat prices will result in further postponement of capital investment in the mining sector in the short term, ultimately impacting platinum and palladium primary supply globally. The socio-political environment in southern Africa is likely to further constrain primary supply growth. Allied to this, we have also seen secondary supply struggling to maintain projected growth, necessitating a drawdown from available above-ground inventories, which is anticipated to become even more pronounced in future.
Both platinum and palladium will continue to receive demand support from increasing emission regulations and growth in the global vehicle fleet in the short to medium-term.
Implats will focus on:
- using conservative price forecasts, given muted platinum sentiment and global risk factors
- improving our market intelligence and market development initiatives
- maintaining focus on cash conservation and balance sheet strength
- continuing to invest through the cycle as prudently as possible, given positive longer-term fundamentals.