Platinum-backed exchange-traded fund (ETF) holdings increased for the ninth consecutive day last week, reaching 2.96-million ounces, the highest level on record, the BMO Metals Brief has noted.

The report put out by BMO Global Commodities Research added that ETF inflows had been strong in the year to date, as investors had seemingly taken a view that palladium might be overbought and saw potential for platinum substitution in autocatalysts over the midterm.

Although platinum had been out of favour for the past few years, with prices dropping from over $1 500/oz in 2014 to below $800/oz in 2018, BMO researchers described the price as having now steadied, after seemingly hitting an inflection point in late 2018 and rising over 6% this year.

Bloomberg reports that palladium was heading for its biggest weekly decline in more than three years as investors’ focus turned to demand amid concerns over slowing global growth, with the decline following repeated warnings that the metal’s recent surge to record highs had propelled it into bubble territory.

Reuters reports that palladium’s sell-off has arisen after some analysts warned of a growing potential for a price correction. A strong dollar added to the headwinds.

Palladium shot into prominence after ‘dieselgate’ put the world off platinum-using diesel vehicles and the market turned to palladium-using petrol vehicles, which sent the palladium price well above the platinum price.

The ongoing contraction in Chinese car manufacturing and weaker macro data have shifted focus to the demand side of palladium markets and, at the moment, “selling is begetting selling” and “much of palladium’s doubling in price over the last eight months was driven by supply concerns, and these are well- explored”, CMC Markets Asia Pacific chief market strategist Michael McCarthy has been quoted as saying.

Last week, spot palladium was $1 363.20/oz in Singapore.

Neal Froneman, the CEO of Sibanye-Stillwater, the world’s only primary palladium producer, said at the recent Joburg Indaba annual breakfast session that the palladium deficit would be addressed through platinum substitution and that the “real dark horse” platinum group metals (PGMs) commodity currently was platinum.

“Palladium will be substituted by platinum and the palladium price will pull platinum up to reduce the palladium deficit,” said Froneman, whose PGMs company, Sibanye-Stillwater, also supplies platinum.

Once the Lonmin transaction has been concluded, Sibanye-Stillwater will be the biggest platinum producer in the world – the company paid a relatively moderate sub-R40-billion to attain that height.

Sibanye-Stillwater’s PGMs entry began in April 2016 with the acquisition of Aquarius for R4.3-billion. That was followed by the acquisition of Rustenburg from Anglo American Platinum (Amplats) in November 2016 for R3.75-billion.

It then bought Stillwater in the US for R25.6-billion in May 2017 and the proposed all-share Lonmin transaction is estimated to be worth R4.1-billion.

For the longer term, Sibanye-Stillwater is positioning itself for participation in appropriate drivetrain and battery metals growth to keep abreast of rapid change.

To obtain the required insight, it has acquired SFA Oxford, which assesses strategic investment opportunities in future technologies. These technologies are moving so fast that it is no longer obvious which metals will be part of the future stream.

Froneman also sees the SFA Oxford acquisition as an enabler to fast-track PGMs market opportunities and to access PGMs-using intellectual properties.

This follows Sibanye-Stillwater’s securing of a toll agreement with Amplats that gives it access to its metals, which opens the way for the company to involve itself in the downstream aspects of the PGMs market.

The company’s South African operations are leveraged to a higher PGMs basket price, with a steady 600 000 oz/y rising sixfold from 2016 to 2018.

Metals Focus founding partner Philip Newman said in response to Mining Weekly that, despite platinum’s widening discount to palladium, he saw no evidence of plans to substitute palladium with platinum in the automotive sector and current emissions standards were acting as a considerable headwind against switching to platinum.

“As for platinum prices, we expect the metal to recover in the latter part of 2019. However, this is largely premised on assumptions of rising gold prices, which help to lift platinum, given the two metals’ positive link.”