Engineering & Mining Journal

JUN 2018

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112 E&MJ • JUNE 2018 www.e-mj.com MARKETS Thomson Reuters recently released its GFMS Platinum Group Metals Survey 2018, looking at developments in the global platinum group metals (PGM) markets over the past year and setting the scene for the rest of 2018. The sur- vey predicts platinum prices to exceed $1,000 per ounce (oz) at times in the second half of the year, a level that has exceeded spot prices for all but one week since February 2017. Meanwhile, the palladium price is set to exceed platinum on an annual average basis in 2018; a historical fi rst. "We expect the platinum price will start a recovery this year, albeit a grad- ual one," said Rhona O'Connell, head of GFMS at Thomson Reuters. "This is pred- icated on a small defi cit this year of near- ly 300,000 oz or 9.4 metric tons (mt), fueled by a contraction in supply, chiefl y from the South African mining sector, coupled with rising demand. The decline in mine output is due to a combination of the sustained reduction in capital expen- diture in recent years leading to a denud- ed pipeline of new projects, and closures from some marginal operations. Despite an uptick in autocatalyst re- cycling and resilient mine production, platinum supply was tempered by a fall in jewelry scrap, leaving total supply almost unchanged in 2017. On the demand side, offtake was weaker as stronger industrial demand was more than offset by falls in jewelry and retail investment, leaving the market in a physical defi cit for the fourth consecutive year at 50,000 oz or 1.6 mt. Platinum mine production inched low- er in 2017, by 1%, to 5.92 million oz (184.2 mt), driven by lower production from South Africa, Zimbabwe and Cana- da. Production disruptions in the form of maintenance work, safety stoppages and mine suspensions were predominantly be- hind the drop in South Africa. Platinum uptake in the production of autocatalyst applications last year rose by 7.1% to 3.48 million oz, 108.2 mt, de- spite negative sentiment from the diesel market in developed economies. China was the standout, rising 16% in 2017. Jewelry demand retreated 5% year-on- year to an estimated 2.2 million oz (68.6 mt), the fourth consecutive annual de- cline. The biggest falls were seen in China and Europe, with fabrication in these key markets falling by 8% and 6%, respec- tively. Platinum consumed in industrial applications (excluding autocatalyst) rose by a combined 7% to a record high. Palladium's Run Continues Palladium's physical defi cit edged low- er last year to 1.2 million oz (37.3 mt), retreating slightly from the record level seen in 2016 of 1.33 million oz (41.2 mt). A 5% rise in total supply was par- tially offset by further modest gains on the demand side. Adjusting for stock movements (from ETF redemptions and industry stocks) the Net Balance slipped to a defi cit of 910,000 oz (28.2 mt), the deepest defi cit since 2014. Mine production of palladium rose by 3% to a total 6.74 millions oz (209.7 mt) last year as output rose in Russia, South Af- rica and United States, but was capped by the losses in Canada. An increase in palla- dium content in mined ore managed to re- duce the balance despite bottleneck issues at the South Africa's platinum belt. At the asset level, the largest increase was regis- tered at Norilsk's Russian operation led by the processing of concentrate purchased from Rostec and work-in-progress material in transit from the Polar to Kola division. Palladium demand in autocatalyst ap- plications rose 4% to 7.9 million oz (245.1 mt) last year, slightly faster than new vehi- cle demand and to a new record high. This was generally a refl ection of rising loadings in China and North America, driven by con- tinued tightening emissions legislation. "Our longstanding bullishness for this metal remains underscored by the growth in demand from the automotive sector, which is set to continue, despite record prices," said O'Connell. "Further sup- port is set to arrive from declines in mine output from the two dominant producing countries, Russia and South Africa." The study expects palladium to average more than $1,000/oz on an annual average ba- sis for the fi rst time this year. For a copy of the survey, visit http:// financial-risk-solutions.thomsonreuters. info/GFMS. PGM Prices Should Remain Healthy Gold and silver prices provided by KITCO Bullion dealers (www.kitco.com). Platinum group metals prices provided by Johnson Matthey (www.platinum.matthey.com). Non-ferrous base and minor metal prices provided by London Metal Exchange (www.lme.co.uk). Iron ore prices provided by Platts Iron Ore Index. Currency exchange rates were provided by www.xe.com. (June 1, 2018) Precious Metals ($/oz) Base Metals ($/mt) Minor Metals ($/mt) Exchange Rates (U.S.$ Equivalent) Gold $1,293.10 Aluminum $2,271.00 Molybdenum $26,000 Euro (€) 1.169 Silver $16.38 Copper $6,814.00 Cobalt $90,000 U.K. (£) 1.337 Platinum $909.00 Lead $2,430.00 Canada ($) 0.773 Palladium $904.00 Nickel $15,150.00 Iron Ore ($/dmt) Australia ($) 0.761 Rhodium $2,250.00 Tin $20,675.00 Fe CFR China $65.95 South Africa (Rand) 0.079 Ruthenium $250.00 Zinc $3,089.00 China (¥) 0.156

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