Platinum and palladium were expected to regain some of its lustre in 2013 as rising production costs in South Africa, which produces about 70% of the global supply of platinum, looked set to push prices higher, French bank Natixis said in its latest quarterly metals review.
The ongoing labour unrest in the South African mining sector, which had disrupted platinum-group metals production and was spreading to other areas of the industry, had come at the worst possible time for producers who were this year struggling to cover their operating costs, the bank said.
Platinum, which in 2012 was at a two-year low at $1 550/oz, was expected to regain some of its sheen in 2013 to $1 700/oz, just under its 2011 price. Pushed higher by production constraints, palladium was expected to increase 15.6% in value to $740/oz, its highest price in two years, as palladium is increasingly finding new uses in high-technology end uses.
Natixis expected the rising costs at South Africa’s platinum mines to remain a significant feature of the platinum market in years to come, and the bank expected palladium prices to be significantly pushed up on the back of South African mining outages. South Africa produces about 35% of the global palladium supply.
After the gold price drifted lower in the early part of the year, dampened by a strengthening of the dollar and weak demand from India, gold had regained some ground in recent months as speculation about a third round of quantitave easing (QE3) by the US federal government was confirmed this summer, resulting in a strong rally.
However, with the federal government choosing to buy mortgage-backed securities, rather than treasuries, Natixis pointed out that it was not clear how the implementation of QE3 would benefit the gold price.
“Instead, the gold market must focus upon the imminent US fiscal cliff and subsequent need to raise the US debt ceiling as the two major events likely to drive gold prices in 2013. If the US follows Europe into its own fiscal crisis, gold prices would have substantial upside, but in our central scenario, in which the fiscal cliff can be avoided, we would expect gold prices to drift lower over 2013, averaging $1 640/oz,” Natixis said.
Further, the price of silver, which generally keeps in-step with gold trends, had recovered about a quarter of its value in August and September, after falling by almost 30% between February and June. The market analyst said the silver price’s behaviour suggested no changes in the commodity’s fundamentals, but rather its price movements were strongly influenced by generic market sentiment and investor behaviour.
Natixis expected the price of silver to ease off into 2013 to average $30/oz, if the US managed to avoid the imminent fiscal cliff.
Natixis said one of the repercussions of the long delay in China’s economic recovery this year was an unanticipated accumulation of inventories, particularly evident in the base-metals market.
As a result of this heavy stock accumulation, the bank said Chinese metals users were unlikely to be squeezed into paying markedly higher prices over the coming year, even if the Chinese economy did begin to improve, as the new cadre of political leaders who took charge this year begin to accelerate the implementation of a wide range of already planned stimulus measures.
The bank found that copper prices had been better supported this year than that of other base metals. The copper market was expected to remain in deficit throughout much of 2013; however, prices were expected to struggle to push past 2011-highs, as China was seen shifting its focus from restocking to destocking, and the country anticipated added production from new projects such as Turquoise Hill Resources’ Oyu Tolgoi copper/gold project, in Mongolia.
The price of copper was expected to rise about 5.5% to average at about $8 500/t in 2013.
The price of lead was expected to rise by 17.5% to $2 450/t, driven higher by rapidly expanding demand from developing countries, where car fleets were ageing and demand for electronic bikes was growing fast.
The price of nickel was expected to rise by 5.1% to $18 750/t, as price growth remained constrained, owing to high stocks of both ore and the finished metal.
The aluminium price was expected to rise 7.4% to $2 190/t in 2013, with the market also seen suffering from chronic oversupply.
Zinc was expected to grow by a modest 6.1% to $2 090/t, the market also seen to suffer from excessive stockpile accumulation.
Edited by: Creamer Media Reporter