Palladium supply shortfall will worsen this year

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    Harare – Specialist materials company, Johnson Matthey said in a report that a deficit in the palladium market that has driven prices of the autocatalyst metal to record highs will widen dramatically this year.

    Palladium, which falls under the platinum group of metals (pgm) is a silvery metal used in catalytic converters for petrol cars and also used to make jewellery just like platinum, and is mined primarily in South Africa, Zimbabwe and Russia.

    All the known pgm resources in the country occur along the 550-kilometre-long Great Dyke of Zimbabwe. Within the Great Dyke, four geological complexes are known to contain pgm and base metal deposits.

    These are namely: Wedza Complex (mined by Mimosa Mining); Selukwe Complex (Unki – Anglo American); Hartley Geological Complex (Zimplats); and Musengezi Complex. Studies suggest a huge resource of several million tonnes of pgm on the Great Dyke.

    The Hartley Geological Complex is the largest of the pgm bearing complexes containing 85 percent of known pgm resources in Zimbabwe.

    In the full year to December 2018, Unki Platinum said palladium production was up 38 percent to 19 600 ounces compared to 14 200 ounces recorded same period last year.

    On the other hand, Zimplats reported a 10 percent increase in revenue to $152,9 million in the quarter ended December 30 2018 buoyed by firm metal prices on the international market mainly palladium and gold.

    Johnson Matthey, a leading autocatalyst manufacturer, said the shortfall in the roughly ten-million-ounce-a-year palladium market narrowed in 2018 to 29 000 ounces from 787 000 ounces in 2017, its widest in three years.

    But it said stricter emissions standards would increase demand for palladium to put in catalytic converters, and supply would struggle to keep up.

    “The rate of growth in secondary supplies is likely to be lower than in 2018, while primary shipments are expected to be flat,” the report said.

    Palladium-backed exchange-traded funds would no longer be able to bridge the gap between supply and demand by returning metal to the market after their holdings fell to 730 000 ounces by the end of last year, it added.

    For platinum, Johnson Matthey said the roughly 8-million-ounce-a-year market was oversupplied by 498 000 ounces last year, up from 176 000 ounces in 2017, and another surplus was expected this year.

    Palladium prices have surged around 70 percent in the last six months to record highs above $1 400 an ounce, above gold for the first in over 16 years, while platinum, once the most expensive of the major precious metals, is stuck near ten-year lows around $800 an ounce.

    Palladium’s strong run is linked to surging sales of petrol cars globally, in part because consumers are turning their backs on diesel vehicles.

    A slew of negative publicity around diesel pollution, combined with wavering support from governments that had previously encouraged motorists to buy diesel, and the emissions data scandal that engulfed Volkswagen, has resulted in the fuel falling out of favour.

    Equity Axis News

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