January 2013 Price Report

The pgm complex had spent most of December 2012 on the defensive in the face of year-end liquidation and the impending US "fiscal cliff" that, by automatically invoking spending cuts and tax increases, threatened to tip the USA into recession. After a last-minute deal was reached over the New Year which postponed the issue, markets breathed more easily, the dollar weakened and precious metals prices rose. Momentum increased prior to the release by Anglo Platinum of its long-awaited restructuring plans, and once the news was out that the major producer was proposing a significant cut in production capacity, the JM Base Price for platinum soared to a high for the month of $1702, in the process losing its discount to gold. The JM palladium price also increased on the news and was further strengthened by media reports of a diminishing Russian state stockpile.

Platinum

The first JM Base Price for platinum in London was set at $1556, an increase of $33 from the last day of 2012. For the next several days it oscillated around this level, stimulated on the one hand by positive manufacturing data from China and depressed on the other by reports of generally weak year-on-year vehicle output numbers in Europe. The gold price exerted its customary influence, especially on the 4th when gold lost $50 in response to indications that further quantitative easing in the US was unlikely. That platinum did not suffer to the same extent was perhaps due to the news that US car sales rose in 2012 by 13.5%.

The breakout from this range that began on the 8th was driven by a more positive attitude to risk on the part of investors and a growing awareness that Anglo Platinum was likely to propose significant production cuts in its review of operations on the 15th. Pausing at $1639 on the 11th, the markets responded to the news from Anglo - that it would sell its Union mine, close four shafts at Rustenburg, cut production capacity by 400,000 ounces a year and make 14,000 staff redundant - with a sharp rally that took the price to $1702 in London and a premium to gold for the first time since March 2012. Apart from the medium term implications for the platinum supply-demand balance, there were immediate concerns about potential disruption to output from industrial unrest. However, although there was a one-day walkout at the Rustenburg operations, the most violent reaction was a verbal one from government and unions protesting at the planned closures and layoffs.

After some profit-taking, the platinum price settled in a range around the $1690 level, with some intra-day volatility due to a battle between buyers who were attracted by possible supply disruptions and sellers of profitable long positions keen to book their gains. Changes in dollar and gold values played their usual part, especially when the latter was resurgent on the 21st and 22nd, but a new bout of gold weakness allowed platinum to regain a small premium. On the 29th, Angloplats agreed to postpone the start of its redundancy process by 60 days in order to discuss it with stakeholders. This also took some of the heat out of the market activity and the JM price closed in London at $1690 on the 31st.

Palladium

Sobering data from the European automotive sector took its toll on investor sentiment toward palladium in the first week of 2013 and from an opening $708 the JM Base Price tumbled to $669 on the 8th. The recovery from this point was helped by the report of a sharp rise in Chinese goods exports as well as BMW announcing record sales of vehicles in 2012. The price was also stimulated by much the same factors as platinum, even though the impact on palladium supply from a cutback in output in South Africa would not be as significant.

After reaching $732 on the 18th, the price retreated a little and settled briefly into a new range above $720. Reports from a London seminar on the 25th that Russian state stocks of palladium are close to exhaustion, coupled with growing optimism about vehicle sales in the USA and China, gave the palladium price an extra boost, decoupling it from platinum and taking it to $760 on the 30th - a 16-month high - before closing the month at $751.

Rhodium

Asian buying met by selling from Europe and North America kept the JM Base Price for rhodium steady at $1080 for the first ten days of 2013. The buying pressure eventually prevailed and with some short covering from European investors reacting to the Angloplats announcement the price began to move up, accelerating its rise to $1175 on the 22nd as the sellers withdrew. The offers then returned to hold the price on an even keel for the rest of the month.

Iridium and Ruthenium

JM prices for iridium and ruthenium were reduced on the 7th, reflecting lack of demand for either metal. With persistent offers in the market and a lack of interest from investors and traders, support for the prices dissipated. Iridium was adjusted from $1050 to $1025 and ruthenium from $90 to $85, remaining at these levels for the rest of January. 

© Johnson Matthey Plc, 2013

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