April 15, 2015 / 1:36 PM / 4 years ago

Platinum, palladium forecasts cut on oversupply, soft demand: Reuters poll

LONDON (Reuters) - Analysts and traders have cut their forecasts for platinum and palladium prices after they underperformed gold and silver in the first quarter, as supply of the metals remains ample in the face of lackluster demand from jewelrs and carmakers.

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

Respondents to a Reuters poll of 31 analysts and traders said they expect platinum to average $1,220 an ounce this year, nearly 7 percent below the price view returned in a similar poll three months ago.

They also cut their average palladium forecast to $810 an ounce for 2015, from $845 in January.

Platinum fell for a third straight quarter at the start of this year, while palladium underperformed the rest of the precious metals complex to slide 7.6 percent, posting its biggest monthly drop in March since September.

The metals have been weighed down by a perception that supply remains plentiful despite pressure on mine output in South Africa, source of three-quarters of global platinum supply and the second largest producer of palladium after Russia.

Even an unprecedented five-month strike in the South African platinum sector last year failed to lift prices, with the supply chain cushioned by above-ground stocks. The World Platinum Investment Council last month estimated these inventories at 2.53 million ounces at the end of last year.

“The scale of above-ground stocks implied by the WPIC suggest it could still be some years before the recent run of structural deficit begin to be reflected in platinum prices,” FastMarkets analyst James Moore said.

Demand growth from carmakers, the major consumers of platinum and palladium, which are used in autocatalysts, is also expected to be lackluster this year, analysts said, while early signs are that platinum jewelry buying in the key Chinese market has not seen a strong response to lower prices.

Output from South African mines has also been recovering after last year’s strike action, analysts said.

“The difficulties of the South African platinum industry have somewhat been alleviated by a weaker South African rand which has lowered U.S. dollar-denominated costs for the miners,” Julius Baer analyst Carsten Menke said.

“(This) does not alter the longer-term outlook of constrained supply,” he added. “(But) for this to materialize into higher prices, we believe demand from autocatalysts and jewelry needs to pick up as well.”

Analysts also cut their platinum and palladium forecasts for 2016. Next year platinum is seen averaging $1,338 an ounce, against January’s forecast of $1,480 an ounce, while palladium is seen at $862 an ounce, down from $900.

Reporting by Jan Harvey; editing by Susan Thomas

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