Barcap lowers PGM price forecasts on poor Chinese demand

Otmane El Rhazi from The Bullion Desk.

Weaker-than-expected Chinese consumption of platinum and palladium has prompted Barclays Capital to lower its price forecasts for 2015, it said in a note.

The broker now sees platinum averaging $1,239 per ounce this year after the spot price fell to its lowest since July 2009 below $1,100 in the first quarter. Spot platinum was last at $1,134/1,139, down $5 loss on Tuesday’s close.

It also expects palladium to average $805 in 2015 given its weaker start to the year. It recently traded at $737/742, up $4.

Still, BarCap continues to expect both markets to be in a deficit over the full year, pegging platinum’s shortfall at 311,000 ounces.

“Although prices have recovered some lost ground, the weakness in price-sensitive demand is clear. In particular, China’s jewellery demand began the year on a much weaker note than we had expected – in turn, prices have not found their customary buffer on the downside,” it said.

Despite the lower prices, volume traded on the Shanghai Gold Exchange is down 36 percent in the first three months of the year. The latest trade data for China show platinum imports down 58 percent year-on-year in February.

Alongside the rest of the precious metals complex, palladium has also come under endured downward pressure, it has held up better than platinum.

BarCap maintains its positive bias given that the metal’s constructive fundamentals remain intact – it sees the market in a deficit of 537,000 ounces this year.

“The availability of metal does not appear to be tight in the near term but [over the] longer term, Europe’s backlash against diesel vehicles is likely to be a positive for gasoline cars and hybrids, in turn a positive for palladium,” the broker said.

But there is a question mark over the size of Russian stocks after Norilsk Nickel said that the country’s central bank has agreed in principal to sell some of its palladium

“We believe such sales make up the unidentified portion of our above ground stocks estimates, thus, is not fresh supply to the market,” it said.

As well, Chinese trade data have been particularly weak – imports have fallen well below the average to 33,200 ounces, the lowest since January 2009. Imports for the year to date are down 38 percent year-on-year.

(Editing by Mark Shaw)

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