Investor demand for platinum and palladium ETFs is rising, says a report from Metals Monthly March 2010, VM Group research for Fortis Bank Nederland.
Since their tumble in early February platinum and palladium prices have been extremely strong. From a low of $1,475/oz on 5 February, platinum gained steadily to hit $1,624/oz by 16 March, a gain of 10% and just shy of the $1,627/oz it fixed at in January.
Palladium did even better, rising from a low of $395/oz on 5 February to hit $475/oz by 8 March, 20% up from its low, and beating its January high - indeed it's the highest fix for palladium since the same $475/oz seen on 20 June 2008.
What's behind these gains?
Unlike gold and silver, investment flows remain positive into the ETFs, although the rapid pace seen in January after the launch of the US ETF has ebbed away, particularly in platinum.
As of 12 March, total platinum ETF holdings were 934,296 oz, up from 902,230 oz at the end of January. Palladium has done better, with holdings of 1,636,523 oz, as of 12 March, up from 1,493,664 oz at end January (with more than 100,000 oz of this coming from the US ETF).
If we add to these the net long positions on the futures exchanges of Tocom and Nymex, both platinum and palladium are at a record high (see chart ETF/Futures holdings). Platinum totals 2.6 Moz while palladium is at 3.2 Moz.
Car sales have been a mixed bag. Passenger cars and light commercial vehicles sales in China amounted to 942,900 units in February, 55% higher than the same month of 2009. While this remains a tremendous rate of annual growth, it was the lowest units sold in a month since August 2009.
February is traditionally a weaker month for Chinese sales, because of the fewer days in the month and also the week long Chinese New Year festivities, when data show a 10%-20% lower level than in January and 20%-40% lower than in March on average, over the past five years.
Meanwhile US sales of 866,667 light vehicles in February were 14% higher year-on-year, a similar rate of increase to January's 12%. However a comparison with 2008 shows a decline of 33%, highlighting how far the market remains from levels considered 'normal' not so long ago.
In Europe diesel continues to recover, posting a 51% market share in December, up from its low of 42.2% in August 2009, a positive trend for platinum. But overall sales are struggling, up just 3% year-on-year in February.
Germany is suffering a hangover from its lavish incentive schemes, down 30% in February (which represents an amount of 82,000 fewer cars being sold) but Italy, Spain, the Netherlands, France and the UK all managed gains sufficient to cancel out Germany's decrease in car sales.
March however might see very poor figures on a year-on-year basis, as in that month of 2009 German car buyers bought 400,965 units, the highest March amount of vehicles purchased in the country since unification.
Short term outlook on platinum and palladium
We've been relatively negative on PGMs due to our view that car sales had been artificially boosted and would begin to decline, especially in Europe.
This is happening but China's efforts to surge ahead help palladium and Europe's diesel bounce-back will support platinum. Production woes will also provide a floor, and so short term we are slightly more positive than we were.
A lot will depend however on the US ETFs. Short-term London fix, platinum: $1,550/oz-$1,699/oz, palladium: $425/oz-$499/oz.
VM Group research for Fortis Bank Nederland - Metals Monthly March 2010