Platinum markets head for surplus in 2022, while palladium in deficit

MOSCOW – Nornickel, the world’s largest producer of palladium and high-grade nickel, today presented the eighth review of the nickel and platinum group metals (PGM) markets prepared in alliance with ICBC Standard Bank.

According to the report, this year was marked with a disruption in chip supply for the automotive industry – the key consumer of platinum group metals such as platinum and palladium.

“If in our market overview published in May 2021 we estimated that the lack of electronic parts would reduce automotive production by 2-3 million vehicles this year, by August-September, it was evident that the chip shortage would cut vehicle production by more than 8 million units making 2021 only slightly better than 2020 in terms of car production volumes,” the authors of the report found.

Nornickel said that the automotive market failed to recover affecting the palladium market more significantly than the platinum market since the palladium use is heavily concentrated in this industry and demand recovery in other industries could provide only a partial relief.

The primary supply of palladium added more than 0.5 Moz this year mainly due to the recovering production in South Africa and the release of work in progress material accumulated by Anglo Platinum and other African producers.

“These additional ounces were sufficient to offset the lower output in Russia completely. All this moved the market balance towards a mild deficit of 0.2 Moz this year. However, even the lower deficit didn’t prevent the palladium price from reaching a new historical high,” Nornickel added.

In 2022, Nornickel said it expects that the chip supply will recover in the second half of the year but still, automotive production will struggle to return to the pre-COVID levels until 2023. Taking into account the improving Russian supply, it is expected that palladium market to be in a deficit of 0.3 Moz in 2022.

In 2021 the platinum market, excluding investment demand, is expected to be in a surplus of 0.9Moz in 2021, as rising consumption can’t absorb the 1.5 Moz additional supply that is coming from South Africa this year, Nornickel noted.

“Next year, platinum demand is expected to stay relatively flat as the falling share of diesel cars in Europe offsets gains in other applications. At the same time, the metal production will continue growing, keeping the market in a 1 Moz surplus, excluding investments,” Nornickel said.

On the other hand, a series of supply curtailments together with exceptionally robust demand recovery and massive restocking throughout the value chain triggered by the logistical constraints have dramatically tightened the nickel market in 2021.  

As a result, Nornickel said it has revised the 2021 market balance and now expects nickel market to swing to a 149 kt deficit (52 kt surplus in the previous estimate) on the back of strong stainless and battery sectors as well as the significantly underperforming launch of Indonesian NPI capacities due to the COVID-related difficulties.

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