Palladium tipped for highest yearly average price on record in 2018 — survey

LONDON — Autocatalyst metal palladium is set to post its highest yearly average price on records going back more than 30 years next year, a Reuters survey showed on Friday, as rising car demand drives consumption of the metal.

A poll of 27 analysts and traders conducted over the last two weeks returned an average palladium price forecast of $800 an ounce for 2018, 29% above last year’s average. The metal has risen 20% so far this year.

Palladium has scaled loftier peaks, rising as high as $ 1,090 an ounce in early 2001, but has not been able to sustain such elevated levels. In its strongest year to date, 2014, it averaged $799 an ounce.

This year the metal is expected to average $ 770 an ounce, 6% above the prediction delivered by a similar survey in January.

“Further growth in petroleumbased autocatalyst demand and limited supply growth will keep this market in continuing short supply for 2017 and 2018,” Investec analyst Hunter Hillcoat said.

Some three- quarters of palladium demand comes from the automotive sector, with particularly heavy loadings of the metal used in the gasoline- powered vehicles favored in the world’s biggest auto markets, China and the United States.

China is expected to drive global growth in auto sales in 2017, IHS Automotive said in a report earlier this year. China is also planning tighter emissions standards which will require automakers to improve catalytic converters.

“Rebounding emerging-market car sales and resilient sales in China remain particularly supportive for palladium, a trend we see continuing,” Fastmarkets analyst James Moore said.

Palladium’s sister metal platinum is expected to average $1,007 an ounce this year, marginally above the January forecast, and to climb to $1,100 an ounce in 2018.

Platinum is more heavily used in the diesel vehicles favored in Europe. The sector has been plagued by environmental concerns since the Volkswagen emissions scandal of 2015, and IHS Automotive says diesel’s share of the EU car market could sink to 40% by 2021. In 2015 it was more than 50%.

The metal has also struggled to attract investment after its failure to respond more positively to years of market deficit.

“Bearish structural factors such as falling market share for diesel and shifting China consumer appetite away from platinum jewellery remain major obstacles for investors,” Mr. Moore said.