Melek: PGMs Will Outshine Precious, Base Metals

Mineweb, Dorothy Kosich

TD Securities Head of Commodity Strategy, Bart Melek, says he expects PGMs to be star performers into 2013, "outshining other precious and base metals."

Melek asserts that a "perfect storm" is brewing for PGMs as "robust demand growth coming from the auto catalyst market and other industrial applications, and a lackluster and uncertain supply outlook are projected to dramatically tighten the PGMs market in 2013."

"Rising costs and resource nationalism in key producing nations, along with an increase in investor interest are additional factors that will likely support PGMs," he advised. "Platinum and palladium should also benefit from their gold-like qualities, as investors continue to buy physical precious metals to protect against systemic risks associated with sovereign debt defaults, future inflation, and the U.S. dollar."

Melek said he expects "palladium to shine the brightest due to its unique structural supply chain issues and technological advances boosting auto sector demand for the metal."

He also forecast total platinum demand over the next three years "is projected to witness a period of uninterrupted increases, following a robust 2010. Demand is expected to post a 5.3% increase this year, follow by a 7.9% jump in 2012 and a 4.6% gain in 2013-all supported by Chinese jewelry sales and the auto sector."

Platinum fabrication demand is expected to grow 19% over the next three years to about 8,500k oz., while supply is project to increase 10.4%. "The current structural deficit is expected to widen to roughly 1,900koz and the market deficit to 230koz by 2013," Melek forecast.

However, TD Securities suggested higher prices will be needed over the longer term "in order to provide sufficient incentives to build green field projects, which are needed to balance supply with demand."