LONDON (Commodity Online): The falling sales in automobile industry in first half of 2011 has also caused concern for the precious metals industry as palladium and silver depend on this sector for a part of its industrial demand.
According to Barclays Capital, a massive 57 percent of Palladium demand comes from automobile industry where it is used in catalytic converters and it faces competition from platinum which is also suitable for the same purpose. On the other hand silver is used in smaller quantities in semi-conductors which go into electronics assembly in newer-generation vehicles.
However, precious metals industry need not panic on reports of slowing down of automobile industry in the second quarter of 2011 as it will be made up by recovery in sales during third quarter and subsequent bullish trend in towards the end of the year, according to Barclays Capital.The automobile market has received a setback in first half of 2011 on Japanese production disruptions due to tsunami and earth quake which has affected the global supply chain including parts supplies to North American markets. The monetary tightening in China and India to curb inflationary trends have also impacted sales of passenger vehicles
Among precious metals, silver demand is set to suffer the most on due to slow growth in automobile sales with an estimated 177 koz of demand (or 0.50% of total) lost this year while platinum would suffer 30 Koz demand loss and Palladium lesser at 18 Koz, according to Barclays estimates.
"Across the precious metals in tonnage terms, silver suffers the greatest loss, but this represents less than a tenth of 1% of global silver demand whereas palladium, the metal market most heavily skewed towards the transport sector, suffers a loss of 0.4%.
JD Power survey has forecasted vehicle sales to grow at a slower rate of 5% but this is due to the higher base effect caused by mouting sales in 2010 due to a series of ncentives provided by US Government and higher economic growth in India and China. Barclays Analysts point out that there is no reason for anxiety in the precious metal industrial demand as automobile sales will pick up after a lull towards the end of the year.
Meanwhile, average PGM loadings are set to rise to meet tighter emissions legislation, on a global scale."Across the platinum group metals (PGMs), we estimate an increase in platinum auto-catalyst demand by more than 400koz in 2011 across the transport sectorand over 300koz of palladium (increasing consumption by the sector by 6% y/y). Across the PGMs, we estimate an increase in platinum auto-catalyst demand by more than 400koz in 2011 across the transport sector. and over 300koz of palladium (increasing consumption by the sector by 6% y/y)."
