Decline in commodity prices accelerate in European session as sovereign default concerns in Greece intensify ahead of a speech by Juergen Stark, a ECB member, later today. Investors worry about the deteriorated financial situation in Greece will be spread to other European countries and eventually damp economic recovery. Capitals have been flowing out of risky-assets to the dollar and the yen. The euro slumps to 1.4165, the lowest level since August, 2009, against USD.
While the market anticipates Stark will deliver a pessimistic outlook on the Eurozone's economy and Greece's fiscal deficits, Managing Director Dominique Strauss-Kahn said the Greek issue is a serious problem but it would not lead 'to the fragmentation of the euro zone'.
However, it's uncertain how big the cost would be so as to survive in the credit crisis and a big hit on the euro seems to be imminent.
WTI crude oil price slides to 77.9 while gold also dips to 1129. PGMs also retreat on profit-taking with platinum and palladium losing -0.77 and -0.8%, respectively.
Palladium price outperformed platinum price by around +50% in 2009. We expect palladium will continue to perform better than platinum this year, despite a smaller degree, as the former is more highly correlated to global economic recovery and financial markets.
Last year, palladium probably recorded a surplus of 655K oz, according to Johnson Matthey's estimates. In fact, the metal has been running is surplus since 2001. However, the demand/supply is getting better as there are signs of increasing demand for palladium-rich autocatalyst and more avenues for investing in palladium. Moreover, possible depletion of Russia stockpiles should tighten the supply side.
While also in the PGM group, demand structure for palladium is different from that of platinum. In 2009, autocatalyst consumption contributed around 45% (a percentage similar to previous years) while jewelry took up only 9.7%, of total palladium demand. Palladium autocatalyst demand (-12%) did not drop as much as platinum (-35%) while increase in palladium jewelry demand (+7.6%) was also significantly lower than platinum (+79.5%).
Despite the fall, palladium autocatalyst demand has been comparatively resilient. In Europe, introduction of scrappage schemes in many countries stimulated sales of the smallest, cheapest vehicles which are mostly gasoline-fuelled and thus boosted the market share of the gasoline engine and supported palladium demand. At the same time, average palladium content in diesel catalysts and particulate filters has also increased, thus offsetting demand reduction.
In 2010, with recovery in global auto production expected, palladium demand for use in 3-way (gasoline) catalytic converters should rise in the US, Japan and China. The early stages of the Euro 5 light duty emissions rules will drive additional filter fitment on new vehicles in Europe, boosting palladium demand as well as platinum demand since many of these filters will contain some palladium.
Investment demand took off in 2007 and contributed 3.8% of total palladium demand in that year. Growth in demand accelerated in 2008 and 2009 and is expect to rise further this year.
While South Africa is the largest platinum producer, Russia's production in palladium is around 50% more than that in South Africa. Supply in palladium probably dropped -1.8% last year due to a -2.7% decline in Russian production despite +4.1% rise in South African production. Depletion of Russian government stockpile is imminent and this will great shrink global supply.
No comments:
Post a Comment