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Given the soft demand conditions, particularly in Europe, Barclays believes risks remain to the downside for platinum in the near term, but fundamentals are set to evolve constructively over the course of 2013 even as..

12 Jan 2013

Commodity Online
Barclays in a precious metals price outlook for 2013 has said that platinum prices may average $1690/oz for the year even as it may touch a high of $1840/oz and a low of $1390/oz.

Platinum found itself pulled and pushed by the escalation of supply disruptions in South Africa and tumbling European auto demand.

But unlike in the previous year, the metal struggled to find meaningful support from its marginal cost of production.

Given the soft demand conditions, particularly in Europe, Barclays believes risks remain to the downside for platinum in the near term, but fundamentals are set to evolve constructively over the course of 2013.

“We expect the market to deliver a second year in deficit in 2013 after a sizeable deficit in 2012, but despite this, supply has not been constrained and inventory levels remain healthy, with consumers well hedged.” Barclays noted.

“Although this implies that additional supply cutbacks are required for prices to move higher, this would send unaffected output above the cost of production, in turn reducing the likelihood of voluntary cuts.” it added.

In our view, prices will need a stimulant on the demand side to facilitate sustained gains, which we expect to materialise as inventory is run down and tighter auto emissions legislation implemented.

Palladium
Palladium prices would average $736/oz and may trade in the range between $590/oz and $835/oz in 2013.

“In our view, palladium retains the strongest fundamentals across the precious metals and is set to deliver the widest deficit. However, we do not believe it will be plain sailing for palladium prices, given that the demand picture looks soft in the near term, with China’s palladium imports falling to the lowest level since February 2009.” the Bank noted.

Although finished goods inventories have fallen, sustained growth in sales is required before palladium demand can recover later in the year.

Indeed, the report expects auto demand to continue to grow in key palladium consuming regions such as North America and China in 2013, providing a firmer footing for prices.

On the supply side, Russian palladium shipments to Switzerland have also slowed significantly in 2012, and although not conclusive evidence of reduced state stock reserves, the trend is certainly supportive.

Outside state stock releases, alongside platinum, palladium mine supply looks set to remain challenging, with the real scope for growth only stemming from recycling.


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