The platinum group metals (PGMs) have struggled this year. Platinum has gained around 5% to just over $1,800 an ounce and has slipped behind the gold price again as the yellow metal has surged. Over the past ten years it has, on average, been $420 more expensive. Palladium has slid by 10%.
As far as supplies are concerned, there are ongoing worries about disruptions in South Africa, the biggest PGMs producer. The strength of the South African rand against the greenback, and rising power and labour costs, along with the ever-present threat of strikes, are all potential constraints on production. Meanwhile, the PGM supply-demand balance looks “fairly tight” overall, as precious metals group Johnson Matthey points out. It has pencilled in a platinum market close to equilibrium and a palladium market in deficit for the end of 2011.
However, the demand outlook is a bearish factor. Both PGMs are used in automotive catalysts, which account for 60% and 40% of platinum and palladium demand respectively, as Erika Rannestad of CPM Group points out. With the global economic outlook clouding over, automotive demand is set to fall back. In China, growth in car sales is expected to slow to 3%-5% this year, down from a 32% jump in 2010, says China’s State Information Centre. Given all this, PGM prices look unlikely to plummet, but will struggle to make headway over the next few months.