Platinum, palladium bear brunt of brutal 2016

PGM outlook is unclear

In midday trade Tuesday on the Nymex in New York, platinum for delivery in April – the most active contract – were down nearly $10 an ounce to exchange hands for $836.50 an ounce.

Earlier in the day the platinum price dipped to its lowest level since November 2008, when at the height of the global financial crisis the precious metal briefly traded below $800 (it would top $1,000 a mere three months later).  For any sustained period trading below $800 an ounce you have to go back 12 years.

While the gold price  also retreated on Tuesday, the platinum discount to gold is now at a record of  $250, exceeding even the gap when gold was trading at record highs above $1,900 an ounce in 2011. Traditionally platinum has attracted a premium to gold.

Nymex contracts for December delivery of sister metal palladium fell more than $20 to $451.20 an ounce early on Tuesday, before recovering to breakeven for the day. Down nearly 16% just this year, palladium has been on a wild ride since reaching a 13-year highs above $900 an ounce in September 2014 but is now back to levels last seen in May 2010.

The weakness in PGMs (rhodium was the worst performing metal last year amid pretty stiff competition) are contrary to relatively strong fundamentals.

Next to jewelry, platinum’s main application is in autocatalysts to treat emissions, while more than 70% of palladium finds its way into vehicles. Platinum use skews towards diesel engines, while palladium is used to scrub emissions of gasoline vehicles.

The US auto market hit a 15-year high in 2015 with sales topping 17 million units, helped in no small measure by falling oil prices and a fleet that’s on average more than 10 years old. China, the world’s largest gasoline vehicle market hit an all-time high of more than 21 million cars moving off lots, up 7% year on year with similar growth rates expected in 2016.

European vehicle sales, where diesel powered cars and trucks dominate the market, have also been robust. Sales growth of nearly 9% is expected on the continent for 2015 while the UK hit a record number of 2.6 million units sold in 2015, a 6% rise.


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