sul palladio ho trovato questo, i fondamentali paiono brutti alquanto
Spot Palladium Could Slide To $150/Oz
By DAVID ELLIOTT
Of DOW JONES NEWSWIRES
LONDON -- Spot palladium is vulnerable to a slide to a 19-month low at $150 a troy ounce over the coming weeks, industry analysts say.
A global surplus combined with significant producer stockpiles and a fund net long position have all been blamed for the gloomy outlook in a market few can find anything positive to say about.
"Clearly, the fundamentals stink," said Stephen Briggs, metals analyst at Societe Generale in London. "It's hard to see the market moving out of structural surplus."
It is this situation that has been behind the slide from $337.50/oz in early April to a 19-month low at $181.50/oz Wednesday, although dealers felt the decline over the last few days can be attributed to a sell-off on the gold market, which tends to pressure other precious metals.
Nevertheless, most believe the slide in palladium -primarily used for the manufacture of autocatalysts -- is justified when viewed against estimates for supply and demand in the coming year.
Johnson Matthey, in their November Interim Review, put global supply of palladium in 2004 at 7.160 million ounces against demand of 6.140 million ounces.
This imbalance reflects a lag in the response to spot palladium's rally to $1,125/oz in early 2001.
Back then consumers such as autocatalyst manufacturers were eagerly searching for cheaper alternatives to palladium, such as platinum.
The transition took a while but proved extremely successful and demand for palladium slumped in the intervening years.
As a result, the price of platinum soared, climbing from around $450/oz in late 1999 to the current level of around $850/oz while palladium fell back below $200/oz.
This made palladium more affordable to autocatalyst manufacturers but, because of the time lag involved in converting production templates back to palladium, even the low prices on offer today are only eliciting a slow recovery in demand.
The delivery of stocks on to the market doesn't help matters. Of particular note is the delivery of inventory held by Stillwater Mining Co. (SWC) to customers over the last year. Much of this is thought to have been part of the 877,000 ounces of palladium Norilsk Nickel (GMKN.RS) used as part payment for a majority shareholding in Stillwater.
Johnson Matthey pegged the total volume of sales from Stillwater in 2004 at 375,000 ounces and the remainder of the inventory is scheduled to be sold during 2005 and the first quarter of 2006.
Adding further pressure to the market is liquidation of long positions by investment funds. Participants feel there could be more to come from this area.
This is highlighted on the Comex market where the latest Commitments of Traders report on Dec. 7 showed funds were net long 4,638 contracts of 100 ounces.
"The funds were holding it up for a while but they decided to bail out once we slipped under $200/oz," said James Moore, analyst at TheBullionDesk.com.
While the picture doesn't look rosy, there are some factors that even if they don't lift prices may at least limit price falls in the short term.
First, while there is the potential for further sales from Stillwater and other producers' stocks, the level at which these stocks will be released is unclear, said Paul Walker, CEO of precious metals consultancy GFMS Ltd.
He thinks stock holders wouldn't release a significant volume of palladium on to the market at current levels and would likely wait for higher prices.
Walker said this was particularly true in the case of Russian stock holders.
He was also more upbeat on the potential for palladium demand for jewelry, something other analysts aren't convinced of.
Key to this is the more attractive margins jewelry producers can achieve from palladium use over more expensive platinum.
This is expected to result in increased promotion of the metal, a move which will result in higher consumption as a result of "cost-push," said Walker.
Societe Generale's Briggs though said he felt the only reason for the jump in palladium fabrication in China over the last year was purchasing from jewelers who are backing an increase in demand. And he didn't feel the metal had the attributes to challenge platinum.
The only supportive factor Briggs and others could find from the current dip was from "bargain hunting" at the lows but if other precious metals continue to correct this may not be enough to prevent another break lower, they warned
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