Platinum to see first market surplus in six years in 2017: JM

FILE PHOTO: Platinum bars are stacked at the safe deposit boxes room of the ProAurum gold house in Munich, Germany March 6, 2014. REUTERS/Michael Dalder/File Photo

LONDON (Reuters) - The platinum market is set to record its first surplus in six years in 2017, Johnson Matthey said on Monday, as a drop in demand from the vehicle industry, jewelers and investors outstrips a smaller fall in supply.

But the deficit in palladium is expected to widen to 792,000 ounces in 2017 from 163,000 ounces this year, the company said.

The rising deficit in palladium helped cut its discount to platinum to less than $100 an ounce this month, it lowest in 15 years. The average for the past 20 years has been $555.

Both metals are heavily used in catalytic converters but platinum, which is used more heavily in diesel catalysts, is seen as vulnerable to a drop in diesel market share.

Commenting on platinum, JM said: “Chinese jewelry fabrication is expected to contract again, while automotive demand will be hit by changes in catalyst technology in Europe, in response to the introduction of Real Driving Emissions testing.”

JM, a leading manufacturer of vehicle catalysts, added in its release: “Investment demand is forecast to remain positive, but at lower levels than in the last two years, as purchasing by Japanese investors slows.”

Platinum prices have underperformed other precious metals this year, rising about 2 percent against a near 20 percent jump in palladium. The market is expected to be in a 300,000 ounce surplus this year.

Strong automotive and industrial demand for platinum and firm investment had kept it in a deficit of 202,000 ounces last year, JM’s data showed.

Automotive demand for palladium hit record levels last year, with buying by Chinese automakers up 23 percent. Russian destocking pushed supply up 5 percent.

Reporting by Jan Harvey; Editing by Edmund Blair