London - Platinum's slide to seven-year lows in January marked the end of the 18-month bear cycle that saw it nearly halve in value, Metals Focus said in a report on Monday, as it forecast a shortfall in supply this year.
However, a weak start to the year and limited investor demand will peg prices at $1 010 an ounce, it said. That is well off January's low of $806.31 an ounce, but not far from current levels and a touch lower than last year's average.
Platinum is likely to record a market shortfall of 667 000 ounces this year, it said in its Platinum and Palladium Focus 2016, against a surplus of a quarter of a million ounces last year, as mine supply drops back and automotive demand bounces.
“We are cautiously optimistic regarding platinum and palladium prices over the rest of this year,” it said. “Our forecasts for a rising gold price and hefty deficits for both metals suggest that the risks are skewed to the upside.”
“However, we cannot ignore the lack of interest that investors continue to show towards both PGMs (platinum group metals). This suggests that while prices should rise over the next seven months, their upside is likely to be limited.”
Demand from the autocatalyst segment, is seen rising 5 percent this year, driven by a recovery in European vehicle sales. Jewellery buying is expected to be static, with further weakness seen in China.
Physical investment, which surged last year on the back of strong buying in Japan, is tipped to fall by a third this year.
On the supply side, platinum mine output is expected to fall in major producers South Africa, Russia and Zimbabwe, leading to a 5 percent drop.
Palladium prices are also expected to bottom out this year after sliding nearly 30 percent in 2015. They are forecast to average $610 an ounce, just above current levels but below last year's average of $691 an ounce.
As with platinum, mine production is forecast to fall 5 percent, while autocatalyst demand is expected to be stronger. Jewellery demand is tipped to slide by 12 percent.
REUTERS