JOHANNESBURG (miningweekly.com) – South Africa’s Standard Bank estimates that about 670 000 oz of platinum-group metals (PGM) had been lost by the end of March as a result of protracted strike activity in the sector, with platinum comprising about 400 000 oz of that total and the balance made up of palladium (225 000 oz) and rhodium (54 000 oz).
In its latest quarterly commodities report, the bank also forecast a 815 000 oz platinum supply deficit for 2014 as a whole and a palladium deficit of more than 1.5-million ounces.
Nevertheless, commodities head Walter de Wet did not expect platinum prices to rise materially for the year as a whole, owing to high levels of above-ground inventories.
“Our analysis of above-ground platinum and palladium inventory indicates that this inventory is indeed high. As a result, on balance, the bias may lie towards having to wait longer before PGM prices move higher on a sustainable basis.”
The JSE-listed banking group was forecasting a 2014 platinum price of $1 470/oz, which represented a 0.5% downward revision from its previous quarterly forecast. It had, however, revised its 2014 palladium forecast upwards, to $785/oz, owing to supply pressures, the introduction of palladium exchange trade funds and rising geopolitical tensions involving Russia, the world’s leading palladium producer.
“We also believe that although rallies in platinum are likely to fade, a spike towards $1 600/oz is likely while strikes in South Africa continue. That said, in line with our forecast for the rest of 2014, rallies above $1 500/oz should fade.”
However, its platinum price outlook for 2015, 2016 and 2017 was $1 725/oz, $1 950/oz and $2 063/oz respectively, while it expected palladium prices to rise to $875/oz, $938/oz and $975/oz over the same time horizon.
The bank expected longer-term upside for commodities as a whole, as slow, yet steady, global economic growth absorbed new supply. However, most commodities remained in surplus and many markets would still need to adjust to a structural slowing of the Chinese economy, which still accounted for about 40% of industrial metal demand.
The thermal coal and iron-ore markets were expected to remain in surplus for some time, but De Wet was relatively optimistic about the near-term outlook for copper, where demand remains solid, but “cracks” had also started to appear on the supply-side. High inventories for other base metals, such as aluminium, were expected to cap prices for some time.
Geopolitical tensions involving Russia could have short-term upside potential for commodities such as nickel, gas, oil and palladium.
For instance, De Wet noted that, since the Indonesian ore ban and the Russian intervention in Ukraine, nickel had rallied by around $4 000/t, from $14 000/t to around $18 000/t, while the palladium price had risen from around $750/oz to around $800/oz.
However, the bank’s base case was for these price increases to be episodic rather than long-lasting and was even concerned about longer-term negative consequences for metals and minerals should there be protracted period of supply disruption.