Palladium producers gain on the JSE

JSE-LISTED platinum producers notched up gains as the palladium price touched the $1 600 (R23 086) an ounce mark, a record high on peaking demand.

Palladium has doubled since September, reaching $1 596.84 an ounce yesterday amid high demand by the automotive industry and as reports emerged that Russia also planned to ban the export of precious metals scrap and tailings to promote domestic refining of the materials.

Anglo American Platinum, the world’s biggest platinum producer, rose by 1.69 percent to trade at R814.69 a share, Impala Platinum, the second biggest platinum miner, was up 2.53 percent to R67.20 a share, while Lonmin, the world’s third biggest platinum producer, was R2.27 percent higher at R13.50 a share. Royal Bafokeng Platinum was 1.54 percent higher at R33 a share.

Palladium, a lustrous white metal resistant to corrosion, reached record highs in 2018, driven by vehicle producers to meet stringent gas emission standards. Stringent emission standards adopted in China and Europe are likely to promote the use of palladium and rhodium petrol autocatalysts, according to analysts.

Seleho Tsatsi, an investment analyst at Anchor Capital, said yesterday that the higher palladium price is good news for South Africa, which is home to 80 percent of the world’s known platinum group metals (PGM) reserves.

“It is great for South Africa as a country.”

Tsatsi said the palladium price was now nearly twice the price of platinum.

“This increases the financial incentive for vehicle manufacturers to switch from palladium to platinum. Having said that, feedback from industry suggests that this process can be surprisingly slow,” said Tsatsi.

Palladium along with ruthenium, rhodium, osmium, iridium and platinum, are among the six metals in the PGM basket.

PGM producers have been smiling all the way to the bank after record palladium prices provided a significant increase in revenue for PGM producers. Anglo American Platinum revised the dividend payout ratio policy to 40 percent from 30 percent of headline earnings last year.

Rhodium also performed very strongly in 2018, when the average market price increased by 103 percent to a seven-year high of $1 938 an ounce. It traded $911 an ounce in 2017.

The Volkswagen emissions cheating scandal also constrained supply, with the US Securities and Exchange Commission filing a civil complaint that from April 2014 to May 2015, VW issued more than $13 billion in bonds and asset-backed securities in US markets at a time when senior executives knew that more than 500 000 US diesel vehicles grossly exceeded legal vehicle emission limits.

There were also reports that Fiat Chrysler planed to recall 862 520 cars.