Platinum 2011: PGM markets forecast to tighten up .:Macquarie Research

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Platinum 2011: PGM markets forecast
to tighten up
Feature article
 Johnson Matthey (JM) has released its annual PGM market survey (Platinum
2011). The survey points toward tighter PGM markets in 2010 than JM had
originally anticipated in its November 2010 preview, with this tightness
expected to continue into 2011.
 JM's PGM fundamental view is broadly consistent with our own, particularly
with regards to our platinum and palladium market outlooks. We continue to
favour the palladium market fundamentals (versus platinum's) over the
medium to long term, albeit marginally, and we are projecting deficit markets
for both metals for the foreseeable future. We do, however, caution that we
are yet to incorporate JM's latest review into our PGM supply demand model.
Latest news
 Base metals were mixed on Monday. Copper rose on an LME stock
withdrawal and improving sentiment toward the supply-demand balance
following the large SHFE withdrawal for last week (data released Friday). Zinc
continued to be heavily shorted, and we are becoming significantly more
bullish on zinc from these levels.
 Following on from our Commodities Comment titled Copper: Some early
evidence of China tightening up (dated Wednesday, 11 May), we can report that
global copper treatment charges and scrap discounts are also
narrowing/showing signs of tightening. In addition, our feedback on the ground
in China is incrementally bullish, and we are taking our short-term trading call off
of copper as a result (see the Macquarie China Commodity Call, dated 17 May
2011). Copper, in our view, is now a buy, and we highlight that our current 2H11
and 1H12 price forecasts are more than 25% above current spot prices.
 PanAust resources, which operates the 60–70,000tpa Phu Kam copper mine in
Laos, reported on Friday that it had, as a precaution, temporarily suspended
Phu Kham mining and crushing operations (for the safety of its employees and
contractors) after a company security vehicle was fired upon by unknown
assailants. While operations are returning to normal, the company advised that
there had been a number of sporadic security incidents within the company’s
contract area in Laos over the course of the last 12 months.
 Preliminary Indian iron ore export data for April shows a continuation of the
trend evident over the past few months, with volumes down 28% YoY at
9.06mt. This is the 11th consecutive month of YoY falls, with Goa again being
the only state to exhibit growth. Over the first four months of 2011, Indian
exports have fallen 12mt compared with the same period in 2010, another
factor which has contributed to the heavily undersupplied market.
 Brazil’s Samarco has confirmed it is selling iron ore pellets at a $40–45/t
premium to sinter mines in the current quarter. Again, this reflects the change
in mindset in the iron ore pellet market, for which premia of above $20/t have
been rarely seen historically. With contract iron ore prices set to be essentially
flat into 3Q, we also expect minimal change in the premium.