Platinum and palladium prices have been weighed down in February by soft investment demand, strong annual growth in mine production in South Africa and a weak European economy, Société Générale said in a note.
Platinum futures on the New York Mercantile Exchange are currently trading at $1,165.50 per ounce, down 9.2 percent from the recent peak of $1,285 on January 21. Palladium meanwhile has been trading in a sideways fashion since the beginning of the year, ranging from around $760 and $820.
On the investment side, platinum and palladium ETF holdings are down 2.7 percent and 2.9 percent, respectively, from the end of last year, SocGen analyst Robin Bhar said.
“ETF purchases and sales have a significant influence on PGM physical demand and represent a significant portion of investment demand,” Bhar said.
For example, platinum ETF holdings in 2014 increased just 107,000 ounces, accounting for only two percent of total physical demand, compared to additions of almost 900,000 ounces, or 14 percent of total physical demand, the prior year, Bhar said.
“The decline in holdings this year likely reflects investor weariness to open long positions in these metals given the expected increase in mine production this year relative to last when a multi-month strike reduced supply out of South Africa by 32 percent for platinum and 24 percent for palladium,” Bhar said.
“Negative investor sentiment also could be fuelled by a weak European economy, which has a significant influence on auto demand for these metals,” he added.
On the supply-side, South African mine production is expected to increase 23 percent and 18 percent for platinum and palladium, respectively, in 2015, SocGen said.
“On 9 February, Anglo American Platinum reported results for the 2014 calendar year including a 21 percent decline in equivalent refined platinum production in 2014, but cited a faster than expected ramp-up post strike as helping to curb the decline,” Bhar said.
“A faster than expected ramp-up period for the company as well as Lonmin has weighed on investor expectations of PGM price appreciation in the short to medium term,” he added.
The post PGM prices hit by investor indifference, stronger mine output appeared first on The Bullion Desk.
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