Platinum drops to 5 year low on demand concerns

Wednesday, October 01, 2014

Platinum prices plunged to a five year low today as concerns that demand for the metal, commonly used in catalytic convertors, was faltering. After reaching a year-to-date peak towards $1,20/oz earlier this year as strike action in South Africa and threats of sanctions against Russia, the two largest producing countries, prices have declined over 16.2% with today’s sell-off contributing 2.2% to the total decline so far. Palladium prices have also moved lower in tandem, after reaching a thirteen year high in early September towards $912/oz prices have plummeted almost 16% in on month with the first session of Q4 off to bearish start as losses extended towards $760/oz in early trade.

As production levels steadily resume in South Africa the focus has shifted to the demand side and with sluggish demand from auto manufacturers, owing to slower manufacturing growth in Germany which slid to its lowest levels in 15 months, investors have sold-off platinum holdings. Concerns in Europe were further exacerbated by UK manufacturing data, which saw the manufacturing PMI slip to a 17-month low, missing expectations of 52.7 in September as the reading came in at 51.6 putting further pressure on the automotive market. Japanese auto sales also came under pressure, falling 0.8% last month which has further aggravated the steep decline in the PGM’s.  

Three month LME aluminium prices slid to an eleven week low today, towards $1,930/oz as a stronger USD continues to limit gains. Prices have shed more than 8.5% since early September after contracts consolidated around $2,100/tonne, a high last reached in February last year. The sell-off today was exacerbated by the absence of Chinese traders owing to the National Day holiday.

Global equity markets slipped lower today with the majority of European benchmark indices paring yesterday’s losses as less than impressive manufacturing data from the UK and Germany. After opening somewhat shakily into positive territory major European stocks drifted lower, led by the CAC 40 which was trailing 1.2% lower at the time of writing. Across the Atlantic, both the S&P 500 and DJIA started the US session under pressure, extending yesterday’s modest declines as a combination of a stronger dollar and geopolitical concerns prompted investors to sell-off risk assets.    

Platinum prices extend their sharp decline 

XPT Curncy Platinum Spot Oz 2014 10 01 10 48 41

Sluggish auto demand also puts pressure on palladium

XPD Curncy Palladium Spot Oz 2014 10 01 10 51 39

UK manufacturing PMI slips to 17-month low

MPMIGBMA Index Markit CIPS UK M 2014 10 01 11 14 16

More from: Kash Kamal