Platinum and Palladium Outlook: Gains to Come in 2014

As 2013 draws to a close, platinum and palladium market participants are beginning to wonder what’s in store for the metals in 2014. That, of course, depends in large part on what happened to the precious metals this year. 

Here, Platinum Investing News reviews the supply and demand trends that affected the platinum and palladium markets in 2013 and looks at a variety of predictions for 2014.

2013 performance

Platinum demand is expected to exceed supply by the largest margin since 1999 in 2013, Johnson Matthey (LSE:JMATsaid in its Platinum 2013 Interim Review, released last month. Overall, the firm expects the platinum deficit to increase by 78 percent from 2012, to 605,000 ounces.

Johnson Matthey sees that increase being in large part caused by continued strong demand for the metal. For instance, though jewelers and car makers are buying less of it, that has been counterbalanced by more industrial purchasing and investment. The metal has also seen high demand from the chemical, electrical and glass industries.

Conversely, Johnson Matthey believes that the palladium shortage will shrink by 36 percent in 2013, to 740,000 ounces, as lower demand from the electrical industry, jewelry buyers and investors outweighs large purchases of the metal.

In terms of supply, smaller amounts of both metals have been delivered this year from South Africa due to mine strikes and cutbacks; sales from Russia’s palladium stockpile have also fallen. “We expect little or no serious recovery in South African supplies,” Alison Cowley, a market analyst for Johnson Matthey, told Bloomberg.

2014 market outlook

As the deficit in platinum looks set to rise, 2014 is likely to be a year of big gains for the metal, according to The Wall Street Journal. Palladium, despite its smaller deficit, is also expected to perform well.

On that note, Ross Strachan, commodities economist at Capital Economics, told the news outlet that he believes palladium will rise by the end of 2014 to $875 an ounce from its current price of $720, an increase of about 22 percent. He expects platinum to increase to $1,800 an ounce by the close of next year; it is around $1,530 at the moment.

Those increases will be caused by rising demand, along with falling supply. Much of that demand will come from the auto industry, which requires both metals for catalytic converters; they are used reduce the toxicity of emissions from vehicles. China’s auto industry in particular is expected to contribute to demand as car ownership and concerns about air pollution are on the rise in the country.

The jewelry industry also uses plenty of platinum as it is stronger than gold and doesn’t have to be alloyed with other metals. The trading volume of the Shanghai Gold Exchange is a good reflection of platinum consumption in the jewelry industry, and it has increased by nearly 45 percent since last year, according to Dillon Gage Metals. Dillon Gage also states that demand for platinum from the chemical and electronics industries is expected to remain strong.

In sum, platinum and palladium are expected to perform quite strongly in 2014, and many commodities trading firms are recommending the metals to investors.

 

Related reading: 

Platinum to Record Biggest Deficit Since 1999: Johnson Matthey

Is Russia (Finally) Running Out of Palladium?