Mitsubishi: Palladium Fundamental Backdrop ‘Exceedingly Strong’

The fundamental backdrop for palladium remains “exceedingly strong,” says Mitsubishi, and platinum is also showing signs of bouncing. Palladium should benefit from strong auto sales in the U.S., with the most recent report showing that November sales of passenger vehicles rose to a 10-year high of 17.1 million units on an annualized basis, up from 16.3 million a year ago. Demand for light-duty trucks and sport utility vehicles rose 9.6%, compared with a more modest 1.3% increase in car sales. “This is positive for palladium demand, since trucks and SUVs tend to have larger engines than cars and therefore require higher catalyst loadings to deal with emissions,” Mitsubishi says. Meanwhile, platinum consolidated above the $1,200 level in the last week, apparently confirming the reversal of a downtrend that since the highs of the year in mid-July, Mitsubishi says. Also, platinum outperformed palladium last week, with the platinum/palladium ratio pulling back from its 12 year low of 1.48 – another indication of platinum’s short-term relative strength, the firm says. “Last week’s new quarterly report from the World Platinum Investment Council and SFA Oxford brought into focus the tight fundamental picture, although as noted in the report, the platinum market moved into a quarterly surplus in Q3 as South African mined output recovered and metal was released by exchanges amid investor liquidations and falling prices.”

By Allen Sykora 

Citi Research: Seasonal Factors Boost Chinese Copper Imports In November

Chinese copper imports continued to rise last month, although Citi Research chalks up this to seasonal factors. Total imports rose to 420,000 metric tons from 400,000 in October.  Citi says “this is a typical seasonal pattern, and December imports may well rise further for the same reason. However, term contracts for 2015 are likely to be far lower than for 2014 given premiums were offered far above spot levels, currently in the $60s, while 2014 saw record term contract bookings as term premiums were well below spot levels of late 2013, around $190.”

By Allen Sykora 

Barclays: India’s Scale-back Of Restrictions Supportive For Gold, But Not Immediately

Monday December 8, 2014 8:14 AM

Barclays says India’s recent decision to lift the so-called 80-20 rule should support gold, although maybe not immediately. The now-scrapped rule called for 20% of all imports to be re-exported as a finished good. “But given that a number of dealers stockpiled in anticipation of tighter trade restrictions and that the announcement comes toward the end of the seasonally strong period for consumption, we do not believe the news will offer support immediately,” Barclays says. Analysts note that India’s Gem and Jewelry Federation has urged that the import duty be reduced to 10% to 5% initially, and then scaled back to 2%, to curb smuggling.  

By Allen Sykora 

Morgan Stanley: Aluminum Price, Premiums Reflect Robust Fundamentals; Supply To Pick Up

Higher aluminum prices and premiums than earlier this year reflect robust fundamentals, although this is likely to lead to increased supply that curtails premiums, says Morgan Stanley. “Throughout this year, the global primary aluminum market balance has increasingly tightened as a consequence of strong demand growth, subdued production growth ex-China and a steady fall in global inventory to a five-year low,” Morgan Stanley says. Nevertheless, the firm says premiums are likely peaking as supply growth resumes, suggesting they are likely to retrace toward long-term levels of $100 to $150 per metric ton next year. In the third quarter, the U.S. Midwest premium was at $447. “Renewed growth in global supply will be the primary driver of the declines in global premia, rather than any deterioration in demand growth, which we forecast at 6.0% YOY (year-on-year) for 2015,” Morgan Stanley says. The higher London Metal Exchange price and premium will probably encourage producers worldwide to expand capacity, the firm says. “China already has returned to full production, after 1H14 curtailments.”