NEW YORK (Commodity Online): The March trade data painted a weak picture for the precious metals with imports of the industrially biased precious metals, silver and PGMs, falling y/y and also down y/y for the year to date.

Silver imports were down 36% y/y and exports down 44% y/y but China retained its status as a net importer of silver. Semi-conductor shipments into the Asia-Pacific region excluding Japan have continued to slow in February and silver powder imports fell by 1% y/y in March, indicative of the softer industrial consumption, but imports have fallen across all forms – unwrought, semi manufactured and jewellery – for the year to date. The appetite may remain soft in Q2 but will possibly recover in H2 12 as the economic backdrop improves.

Platinum imports also fell y/y by 30% to 239koz but were up 27% m/m. However, March 2011 was the second strongest month on record at 342koz, only behind March 2010 at 378koz. Platinum imports into Hong Kong have also slowed and combined imports into China and Hong Kong over the first two months of the year are down just 2% y/y. Volume traded on the Shanghai Gold Exchange remains responsive to price corrections but otherwise below the monthly average. Volume traded in March was down 10% y/y and is down 7% y/y for the year to date.

Palladium imports were down 56% y/y at 45.1koz, and down 3% m/m, marking the second straight month of the lowest imports since February 2009. Palladium prices have been under pressure as concerns over a slowdown in China have escalated and the latest trade data underlines this recent weakness. Palladium imports have almost halved y/y in Q1 12 at 168koz (Q1 11: 295koz). China’s vehicle sales improved in March up 0.6% y/y and 17% m/m at 18.4mn units but are still down 4% y/y in Q1 12. The build of inventory last year still needs to be worked through and concerns over the economy and higher fuel prices have weighed upon end consumption.

But given the expectations for a soft landing in China, coupled with the ongoing implementation of tighter emissions legislation palladium demand should pick up. Auto analysts also note that recent reports of a potential global shortage of the polyamide 12 (PA12) resin has raised concerns that North American or global vehicle production may be negatively affected but they believe the situation is less severe than the shortage after the Japanese earthquake and Thai floods, as substitute material may be available and buffers exist.

Source: Barclays Capital Commodities Report