Platinum and palladium forecasts slashed after chip shortage hits auto sector: Reuters poll
Analysts and traders have sharply lowered their price forecasts for platinum and palladium after a chip shortage forced auto makers to cut production of vehicles containing the metals, a Reuters poll showed on Thursday.
Auto makers account for some 40per cent of platinum demand and 80per cent of palladium demand, embedding them in exhaust systems to neutralise harmful emissions.
The chip shortage worsened over the summer and is expected to continue through next year.
It helped drag platinum prices from a seven-year high of US$1,336.50 an ounce in February to as low as US$901.30, while palladium dropped from an all-time peak above US$3,000 an ounce in May as far as US$1,841.93.
Prices of both metals have regained some ground, with platinum trading around US$1,010 an ounce and palladium around US$2,000 on Thursday, but further gains will be limited, the poll of 27 analysts and traders this month found.
It returned median forecasts for platinum to average US$1,000 an ounce in the final three months of 2021 and US$1,110 in 2022.
For palladium, it predicted averages of US$2,050 an ounce in the fourth quarter of 2021 and US$2,150 in 2022.
A similar poll three months ago forecast averages for platinum of US$1,137.50 in the fourth quarter and US$1,228 in 2022 and for palladium of US$2,800 in the fourth quarter and US$2,625 in 2022.
Graphic - Platinum and palladium prices: https://fingfx.thomsonreuters.com/gfx/ce/zjvqkezalvx/PGMper cent20POLLper cent20Q4.JPG
Analysts said demand should improve as the chip shortage eases and car makers may even overproduce to replenish stockpiles when they can - potentially lifting prices.
Two of the three who predicted supply-demand balances said palladium would be in deficit next year, and two of the three said platinum would be oversupplied.
Longer term, the phasing out of combustion engines will be worse for palladium because platinum is less dependent on the auto industry and is used in hydrogen fuel cells, said StoneX analyst Rhona O'Connell.
"With fuel cells finally getting political backing for vehicles, especially heavy duty (vehicles), the outlook (for platinum) is very promising," she said.
For palladium, she said, "the longer-term outlook is bordering on bleak".
(Reporting by Bharat Govind Gautam in Bengaluru and Peter Hobson in London; editing by Kirsten Donovan)