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Palladium, rhodium demand to remain, despite virus outbreak: analyst
- Though the coronavirus outbreak may affect near-term automobile demand, long-term demand for palladium and rhodium will remain unchanged
By: Nick Jonson
Washington — Though the coronavirus outbreak may affect near-term automobile demand, long-term demand for palladium and rhodium will remain unchanged unless automakers substitute for other metals, managing director Frederic Panizzutti of MKS Dubai said.
“If I was a carmaker, I would definitely stock palladium while the price is lower, and I believe this is going to keep palladium strong, even if the demand goes down in China, the UK, or the demand for parts decreases,” Panizzutti said in an interview this week.
Rhodium and palladium, along with platinum, are used in automobile catalytic converters to control emissions of certain greenhouse gases and pollutants.
“It’s a bargain for car manufacturers to be able to acquire palladium if it goes lower; it’s been a one-way street for months now,” Panizzutti said, referring to the recent rallies in palladium and rhodium.
NYMEX palladium has risen nearly 25% since the start of the year to reach an intraday high of $2,789.80/oz on February 27. NYMEX palladium for June delivery closed at $2,469.40/oz on Thursday.
Rhodium, which is not traded on major exchanges, has risen nearly 114% since the start of the year. The Platts New York Dealer rhodium price was assessed at $12,700-$13,000/oz on February 27.
Analysts have attributed the sharp price increase to automakers trying to secure enough metal for catalytic converters that meet new emissions standards in China, India and Europe, as well as the US and UK.
Further spread of the coronavirus outbreak globally could reduce automobile demand, along with the projected 1 million oz supply deficit in palladium, Panizzutti said.
The China Passenger Car Association on Wednesday said new car sales in China had plummeted 80% in February from a year ago, the biggest monthly decline on record, though it declined to provide a figure.
Analysts attributed the declining sales to government restrictions to limit the spread of the coronavirus in China, where it began in Hubei Province. Hubei is a major auto manufacturing hub in China.
But even if the coronavirus outbreak becomes a global pandemic, governments and businesses will have to adapt as they do nearly every year with widespread influenza outbreaks, Panizzutti said.
Automobile production, and by extension palladium and rhodium demand, would continue, though possibly at a lower rate, he added.
PLATINUM SUBSTITUTION
“I believe the palladium price now is far over the threshold that automakers are willing to accept,” Panizzutti said.
But substituting platinum for palladium in catalytic converters takes time due to design and testing procedures, he noted.
“In my opinion, it should happen, whether it takes several months or longer because the palladium situation is unsustainable. And I see no reason why the situation should change if nothing changes in the supply/demand balance,” Panizzutti said.
“And the only way to change the supply/demand balance is to switch partially or totally from palladium to platinum. If there is no switch, the situation will be the same and will remain a struggle for manufacturers to get hold of material,” he said.
Source: https://www.spglobal.com/platts/en/market-insights/latest-news/metals/030520-palladium-rhodium-demand-to-remain-despite-virus-outbreak-analyst
Tags: clean energy, CSE, palladium, PGM, PGM Demand, stocks, tsx, tsx-v