Platinum and Palladium show global uptrend for commodities, on the verge of heavy losses in 2021

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Palladium appears to be posting its first annual price drop in six years, and platinum is poised for its first loss in three years. The two metals challenge the overall strength of the commodities sector, which is poised to see its benchmark mark its best performance since 2009.

The negative impact on demand for the two metals, due to the global shortage of semiconductor chips, “has strongly influenced investor sentiment and positioning” in the Comex futures market, said Trevor Raymond, director. of research at the World Platinum Investment Council.

Platinum, however, is faring better than palladium this year. It may also be undervalued compared to palladium and gold.

As of December 3, the most active platinum futures contracts PLF22

PL00
came in at $ 926.20 an ounce, down more than 14% this year, according to Dow Jones Market Data. Platinum futures rose more than 10% last year, up for the second year in a row. PAH22 Palladium Futures Contracts

PA00
was $ 1,812.60 an ounce, more than 26% lower this year, which would mark the metal’s first annual loss since 2015. Palladium rose nearly 29% last year .

This year’s losses for both metals contrast with the S&P GSCI XX: SPGSCI,
a commodities index made up of 24 exchange-traded futures contracts across five physical commodity sectors, including precious and industrial metals, which is trading over 28% higher this year. He’s on track for the biggest annual gain in 12 years.

Given the shortage of semiconductor chips, which are used in automotive production, and the primary use of palladium in catalytic converters for gasoline vehicles, the loss of demand for palladium was “much greater than that of platinum, ”explains Raymond. Platinum is mainly used in catalytic converters in diesel cars, and there are many more light-duty gasoline vehicles than diesel vehicles around the world, he says.

The higher price of palladium contributed to its larger loss this year. “The volume of platinum replacing palladium at a 1 to 1 ratio has become more public, and the consequent loss of demand for palladium has added to negative investor sentiment,” Raymond said.

Platinum mining supply continued to “gradually recover” from last year’s Covid-19 operational disruptions, with total mining supply expected to increase 19% this year, to 8.235 million ounces, according to the World Platinum Investment Council’s Platinum Quarterly report published in November. 24, which is based on research from Metals Focus.

Demand for platinum is also expected to grow 14% in the automotive sector and 26% in the industrial sector this year, according to the report, but investment demand for the metal is expected to decline 86% year-on-year. . Against this backdrop, WPIC is forecasting an oversupply of platinum of 769,000 ounces this year and 637,000 ounces next year.

The report says many of the trends that have dominated 2021 are expected to continue into the next year, but Raymond warns that the forecast for 2022 carries a “high degree of uncertainty.”

There is “high confidence” in the expected 1% growth in total platinum mining supply for 2022, as well as in the expected 13% reduction in industrial demand from the “exceptional” levels seen in 2021, according to the report. the WPIC report. But “it is less certain to what extent limitations in processing capacity may dampen the growth of automotive catalyst recycling later in the year, and to what extent vehicle sales and production will rebound as the market rebounds. semiconductor shortage will be solved “.

Platinum is “vastly undervalued relative to its 1: 1 substitution metallic palladium – and relative to gold.”


– Trevor Raymond, World Platinum Investment Council

Nonetheless, Raymond expects palladium prices to remain high as Chinese automakers buy the metal in the spot market for short-term use, and supply growth is “as limited as that of the platinum”. In addition, a rebound in palladium “could be dramatic if the problems in the supply chain of automakers ease.”

Platinum, meanwhile, is “vastly undervalued against its 1-to-1 substitute metallic palladium – and against gold,” he says.


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