MMC Norilsk Nickel reports financial results of 2015 together with situation of platinum group metals market for the nearest future.
Palladiummarketispredictedpositive, deficitremains. Current weakness of prices for palladium is said to be temporary. Record levels of car sales in USA and China (petrol engine cars, where palladium is used in catalyst production) are expected to increase demand growth from side of auto industry in 2016 (+200 thousand ounces). Besides, taking into account that palladium volume calculated per one car in USA is considerably higher than in China (due to more strict ecological standards and larger engine power), the situation in car market of USA is more important considering palladium. Thus, the recovery of economic growth in USA together with decline in oil prices have to stimulate car sale growth for large volume power cars (off road vehicles and pick ups).
Outflow from palladium ETF-funds has decreased considerably for the last months that may indicate the reversal of negative trend. South African mineworkers successfully reestablished work after strike, but Nornickel is not expecting the additional growth of demand from them, because long - term period of low prices affected investments and production level of high -cost mines. The company also believes that the risk of stopping production for the reason of labor disputes or incidents is considerable in South Africa. Growing expenditures for electricity and wages were compensated by devaluation of Rend in 2015, but South African currency is not expected to weaken in 2016.
Primary palladium supply will reduce by 4% due to declining production in SouthAfricanRepublic and production reconfiguration of «Norilsk Nickel». De-stocking of palladium by GOKHRAN is not expected. Therefore, palladium market may have a significant deficit in 2016.
The platinum market forecast is moderately positive, the company promises moderate growth of primary platinum consumption in 2016 (+1%) due to car industry demand and revival of jewelry and chemical industries.
Investment demand will remain steady. Herewith, it is expected not considerable (-1%) declining of world output due to declining production in South African Republic and production reconfiguration of «Norilsk Nickel». The exacerbation of situation in South African Republic may become an additional positive price risk for platinum in case if labor contracts negotiations between mining companies and trade unions fail, because current contracts terms expire June 2016.