Events influencing the PGM markets over the last twelve to eighteen months centred more on macro-economic events than the fundamentals for the metals themselves. The recovery seen in world markets post the 2008/9 global financial crisis has been impacted by the financial woes currently being experienced in Europe.
Concerns about a double-dip recession deepened as Europe grappled with fiscal austerity measures and a slowing Chinese economy, partially the result of reduced exports to Europe, signalled to some that the European contagion could spread worldwide. This concern raised the possibility that the relative immunity of emerging markets – notably China, Brazil and India – to international economic shocks might be wearing thin.
More positively, however, towards the latter part of this reporting period, the US economy continued to show resilience with its ravaged housing and employment sectors showing sustained, albeit slow, signs of recovery. If the double-dip recession is to be avoided, the US will have to continue on its growth and recovery trajectory while the world becomes accustomed to lower growth rates out of China.
China’s economic performance post-2008 was achieved largely by compressing seven years’ infrastructural development into three years. This in turn resulted in exponential increases in commodity prices – a development from which many commodity producers benefited. Now that the Chinese are reorienting their macro-economic model towards one in which domestic consumption is the primary engine of sustained growth – this change of policy will result in an interim slowdown in economic growth. Implats believes that the Chinese central bank’s easing of monetary policy in mid-2012 was a response to the slowdown as a result of this change, from infrastructure to consumption-led growth, a development that should have positive implications for PGMs.
Steadily rising oil prices have stoked fears that inflation poses the greatest single threat to continued growth in the US and China. While there is no doubt that fuel-related inflation could inhibit overall growth, rising oil prices augur well for the medium to long-term price outlook for PGMs as motorists turn to more modern, cleaner and more fuel-efficient vehicles, including hybrids, which in many cases carry greater metal loadings.
Against a backdrop of widespread and varied fears for the worst, investor sentiment towards platinum has been overwhelmingly coloured by a negative outlook on the world economy, with the result that PGM markets have remained extremely fragile. Metal remained freely available and prices accordingly trended downwards.