LONDON (Commodity Online): Palladium's surplus is set to shrink by 62 per cent this year following an increase is car sales across the globe.

The excess supply of platinum will also increase. Palladium demand will fall short of supply by 217,000 ounces this year, down from 578,000 ounces in 2009, said analysts. Consumption by the car industry will advance 15 per cent to 4.6 million ounces, they predicted. Palladium is used in catalytic converters in cars to reduce pollution.

The demand for the metals will increase based on the extraordinary growth in Chinese car sales, with palladium the main beneficiary due to China's greater reliance on gasoline than diesel-engine cars. Gasoline-powered vehicles use more palladium than those fuelled by diesel.

Meanwhile, car sales in India and China are set to go up this year. In another development, BMW raised its 2010 pretax profit and sales outlook, citing improving conditions on international automotive markets.

The German carmaker said it now sees 2010 pretax profit to rise more sharply than previously forecast, with sales rising by around 10% to more than 1.4 million units, compared with its previous forecast for a single-digit increase.

The company now sees its EBIT margin - earnings before interest and tax as a percentage of revenues - at more than 5% in its automobile business.

BMW had said last week it sold 13.7% more BMW brand vehicles last month, adding some automotive markets were recovering more quickly than expected.

The automobile industry in India is expected to do well in the year's first quarter, ended June.

The results' preview by eight broking firms estimated that seven auto makers are expected to post a 40-plus per cent growth in sales, operating profit and net profit in the first quarter. The rise in input costs is likely to affect profit margin by 50-100 basis points.