Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Image: AngloPlatinum
A grueling five-month strike that left 1moz under ground in South Africa – which together with Russia control 80% of the world’s palladium and 70% of its platinum supply – set the stage for the year, but in the end did little to move prices.
Ample above-ground stocks, particularly in key consumer Europe, was blamed for platinum’s lackluster performance, set to end the year down more than 10% after an unconvincing rally that only just extended into the dog days of summer.
The spectre of a complete shutdown of Russian supplies due to sanctions over its Ukrainian misadventures finally lit a fire under the palladium price sending futures to record highs above $900 in August only to come crashing down the following month.
Palladium’s gains for the year will come in just into double digits. Nothing to scoff at amid a general metals meltdown but a bitter disappointment for investors who couldn’t pour money into newly launched palladium ETFs fast enough.
Little discussed rhodium was the clear precious metal winner with a 17% gain for the year, but despite an ETF in existence since 2011 (who knew?), the size of the market limits interest.
All the PGM stars were aligned in 2014 and look where we ended up.
South African miners struck a three-year deal so no strike in 2015; and besides 2014 showed platinum consumers could sit out a prolonged mine supply hiatus.
Russia has been thoroughly chastened by the fall in oil, so government stockpiles (if they still exist) may make it onto the market in greater ounces. While the supply side is as schizophrenic as ever, demand is looking better than in many years.
European car sales have finally accelerated and the EU would do nothing to put a spoke in the wheel in one of its few performing industries. That means little chance of new sanctions on Russia.
China where consumption skews towards palladium is set for another record-breaking year on auto assembly lines and car sales are one of the brightest spots, if not the brightest spot, in the US economy.
Market deficits in 2015 are estimated at 1.2moz for platinum – the highest since 1975 – while palladium is entering the eighth year of an annual shortfall at 1.6moz.
PGM ETF holdings remain close to record levels at 80t – 90t so any price upside could be dampened by investors taking profits and filling those gaps in the market.
New record highs for palladium, but platinum’s rise will be modest.
Putin.
