LONDON (Commodity Online): The August trade data for precious metals revealed a recovery in appetite for PGMs (Platinum Group Metals), and despite the drop in silver imports, the overall picture is a positive one, says Barclays . Palladium imports have been choppy month to month this year, as various incentives and car registration curtailment has weighed upon underlying demand as well as the impact on the supply chain following the earthquake and tsunami in Japan.
However, auto sales have improved y/y over the past three months.
China’s auto sales were up by 4.4% in August at 1.54mn units and have remained above 1.5mn units every month since December. Sales for the year to date are up by 3.7% y/y at 12mn. Indeed, our auto analysts expect auto production to continue to grow by 7% in 2011 and 10% in 2012 for greater China, which bodes well for palladium given that implied stock levels appear to be low. Palladium imports rose by 20.46% in August to 88koz, its strongest month since March this year (100koz) and imports for the year to date are mostly flat y/y.
Barclays continues to expect palladium demand to grow, albeit at a slower pace y/y. Platinum imports also recovered in August, up by 5% y/y at 178koz, its strongest month since April; however, flows into Hong Kong have been softer this year.
Underlying demand remains sensitive to prices, and the sharp correction in early August was greeted by a strong pickup in demand. Prices dipped towards 360CNY/g (below $1700/oz) and volume traded on SGE almost quadrupled.
SGE volume for the full month of August was up by 20% y/y even though the absolute average price of platinum in local terms was up by 10% y/y in August. Prices have softened in September and, in turn, volume traded is up by 70% y/y for the month so far.
Appetite for platinum in China continues to be more sensitive to price volatility than level, with demand from China cushioning the downside. Silver imports were down by 29% y/y at 315 tonnes; however, exports fell by 50% y/y at 68 tonnes, in turn keeping China a net importer of the metal and at its strongest level since February.
China remains a key market for photovoltaic cell production and imports of silver powder recorded the smallest decline, down by 4% y/y while jewellery was down by 27% y/y. However, imports of silver powder for the year to date are the only component in positive territory, up by 4% y/y for the year to August with jewellery being the weakest, falling by 29% y/y.
