Our market

Constrained supply, together with increasing global demand for PGMs will results in fundamental deficits for these metals over the medium to long term.

Outlook and Forecasts

Outlook

 

In our view, most of the bearishness in the short-term price performance is driven by sentiment rather than fundamentals.

There is currently no verifiable data on the quantity of unreported above-ground stocks, who holds them, in what form or how liquid they are. Yet analysts still expect these unquantified stocks to adequately cover any fundamental deficits. Whatever their quantum, they are certainly lower than they were in 2008 when the metal price was twice what it is today.

There is broad consensus amongst analysts regarding the growth in demand for PGMs. When it comes to South African supply, however, the views are rather divergent. Few analysts are taking cognisance of the problems facing South African PGM miners and due to the sector’s good performance over the last few years the market expects South Africa to rebound and produce more than 4.5 million ounces of platinum per annum by 2016 – hence the widely held belief that the market will be in surplus within the next year. We are of the view that South African supply will not reach 4.5 million ounces per annum during the next two years largely due to the difficult operating environment, which has been compounded by significantly reduced capital investment into the sector over the last four years. We expect work stoppages and power and water constraints to continue. These factors, combined with the difficulty of raising capital in a low price environment, underpin our bearish view on South African supply.

FORECASTS

Platinum

Platinum demand is expected to grow 2% in 2015 driven by growth in automotive and industrial applications, while jewellery is expected to drop slightly to 2.930 million ounces. Growth in primary and secondary supplies is not expected to sufficiently cover the growth in demand, hence we expect platinum to be in a fundamental deficit in 2015.

000 TOZ 2014   2015  
    (Forecast) 
 
DEMAND
Automotive 3 210   3 515   
Jewellery 3 030   2 930   
Industrial 1 955   2 030   
Investment 155   50  
TOTAL DEMAND 8 350   8 805  
 
SUPPLY
South Africa 3 340   3 970  
Zimbabwe 400   425  
North America 300   320  
Recycle 2 230   2 450  
Russian Sales 730   760  
Others 130   130  
TOTAL SUPPLY 7 130   8 055  
      Movement in Stocks (1220)  (470) 
     

Palladium

We anticipate a 7% decline in palladium demand for 2015, driven mainly by declining industrial use, jewellery and matured investment uptake. We do, however, expect that the increasing demand for gasoline vehicles and tightening legislative requirements – especially California LEV III – will be positive for palladium demand. The palladium market is likely to remain in fundamental deficit during 2015.

     
000 TOZ 2014   2015  
    (Forecast)  
DEMAND
Automotive 7 100   7 900  
Industrial 2 155    1 700  
Investment 940   (86)  
Jewellery 165   130  
TOTAL DEMAND 10 360   9 644  
 
SUPPLY
South Africa 1 930   2 390  
Zimbabwe 280   300  
North America 905   930  
Russian Sales 2 510   2 470  
Recycle 2 645   2 850  
Others 120   125  
TOTAL SUPPLY 8 390   9 065  
      Movement in Stocks (1970)  (579) 
     

Rhodium

Growing automotive and industrial demand, especially in the Asian markets, should be positive for rhodium demand in 2015. Oversupply should keep this metal in surplus during 2015.

     
000 TOZ 2014   2015  
     (Forecast)  
DEMAND
Automotive 825   880  
Industrial 160   165  
Investment 10   -  
TOTAL DEMAND 995   1 045  
 
SUPPLY
South Africa 505   650  
Zimbabwe 30   35  
North America 25   25  
Russian Sales 70   65  
Recycle - Auto 320   330  
Others 5   5  
TOTAL SUPPLY 955   1 110  
      Movement in Stocks (40)                65