By Chris Shaw
According to the president of Audi America, the carmaker is “short of everything” in the US market. UBS notes the comment matches its own conviction view this year will see a rebound in auto-related platinum group metals demand.
As Commerzbank points out, the car industry accounts for about half of total palladium consumption. Such a rebound in demand would force a re-stocking of metal inventories, which UBS points out were run down in 2009.
Demand is clearly on the increase, as US car and truck production for the year so far is up 63.4% from year ago levels. As UBS notes, this is coming at the same time as there is limited excess supply in the system, as evidenced by the comments from Audi.
According to UBS's numbers, US auto inventories historically average around 60 days worth of supply, but in the middle of the financial crisis in February last year they hit 118 days. Since then, supply has fallen to just 53 days as at the start of April.
Barclays Capital notes an additional positive for both platinum and palladium is ETF or Exchange Traded Fund holdings of both metals remain at record highs. Standard Bank suggests part of the increased interest may stem from comments from Anglo Platinum's CEO that the global palladium market may be in deficit for the next 10 years.
This is based on the view Russian stockpiles will continue to be run down as uses for the metal increase. UBS sees these comments as adding positive momentum to the market, as the consensus view appears to be moving to one of low Russian stockpiles.
Recent news has been more mixed for the base metals, aluminium gaining in part on news Rusal is planning to launch an ETF for the metal. Barclays Capital also notes Alcoa has made reasonably positive outlook comments for the metal, suggesting regional premiums will remain firm through this year as much of the supply in LME warehouses is tied up in financing deals. This means it cannot come out at the same time, so the market should remain reasonably tight despite being in surplus.
News was a little less positive for nickel as Barclays notes Minmetals of China is reviewing a possible re-start of the Avebury mine, while Mincor is also considering re-starting the Mittel mine. Barclays sees this as evidence current prices are reviving a reactivation of mine capacity.
In the oil market Commerzbank notes the latest news has actually been negative for prices, with the American Petroleum Institute (API) estimating US inventories have risen sharply. As well, the monthly report from the International Energy Agency (IEA) was also bearish as prospects for non-OPEC supply appear to be improving.
As Commerzbank points out, this means demand for OPEC oil will be around 200,000 barrels per day lower than previously expected, making the lack of production discipline among member nations something of an issue.
For Barclays the key element of this is the projected call on OPEC output, which it estimates at just over 29 million barrels per day, is very close to actual current output. It sees this as meaning OPEC should be able to maintain the physical oil market balance and so keep prices in line with objectives. This implies prices trading in a range of US$80-$90 per barrel.
