China Palladium Imports Expected to Increase

Platts

Despite recent monthly data showing a substantial drop in imports, Chinese palladium demand is expected to grow this year, though at a slower pace than last year, analysts with Barclays Capital said in a report Tuesday.

Chinese palladium imports in May fell 31.5% year over year to about 50,200/oz., the lowest level since April 2009. For the January-May period, palladium imports are down 7% year over year.

Barclays analysts noted demand from China's auto sector has weakened. Palladium is used to make catalytic converters for gasoline-powered automobiles, like those driven in China and the U.S.

Auto sales in May were down 3.9% at 1.38 million units, the second consecutive monthly decline and the first two-month decline since 2008. Sales slowed following the expiration of some incentives and congestion-easing measures in Beijing and Shanghai, analysts said.

But China's central government has decided not to scrap the subsidy for small cars, "and our equity auto analysts have identified a number of regions for potential growth, equating to 6% growth rate per annum," Barclays analysts said.

Barring any near-term weakness, China's net palladium imports are expected to exceed last year's total of 945,000 oz, albeit at a slower pace, according to Barclays analysts.

Palladium demand continues to be supported by China's bias towards gasoline-powered vehicles and the growing preference towards larger vehicles, along with the next wave of emissions standards, scheduled to be implemented this year, Barclays analysts said.