8/3/2019 Is Platinums Next Move Down

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Is Platinums Next Move Down?

Wednesday, 26 October 2011 12:24

Platinum is looking increasingly vulnerable. Net speculative length has been dropping for some

weeks now and, as this graph from a Standard Bank report to investors shows, the trend has

been generally down for much of this year. The net position is mostly due to an increase in shortpositions those investors expecting a decline in prices than a major exit of longs. This

equates to a market with a weakening expectation of future prices.

Source: Standard Bank

In lockstep with rising short positions is an ETF market that appears to have lost faith in the

platinum market. As this graph from the bank shows, ETF holdings in platinum have been

relatively flat all year after rising for the previous few:

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8/3/2019 Is Platinums Next Move Down

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Is Platinums Next Move Down?

Wednesday, 26 October 2011 12:24

Source: Standard BankWhy should this be? In spite of eurozone worries, the main drivers of platinum demand autoand chemical industry catalysts have been relatively solid. In fact, for many other metals,such as aluminum and steel, the auto market is the one bright spot in terms of solid demand.Much of the growth in platinum demand, however, has been predicated on exceptionally strongChinese automotive growth, a trend that has eased this year for a number of reasons. Inaddition to slowing auto sales growth, a report by Michelle Smith in Resource Investing Newsexplores platinum auto catalysts demand and explains why simple auto sales numbers are not agood indicator of platinum demand.The report states that according to the China Association of Automobile Manufacturers, autoproduction in China was nearly 12 million units by the end of August, a 3-percent increase onthe year before. This is much below the level of domestic GDP growth in excess of 9 percentand reflects the withdrawal of 2009/2010 incentives such as the slashing of car tax on smallvehicles and the double subsidy offered to farmers. These stimulus incentives boosted demandin 2009 by 46 percent and contributed to our perception that China is a small car market.Here lies the first of our misconceptions: 12 million cars in China is not the same as 12 millioncars in the US. US cars tend to be much larger saloons or SUVs requiring larger and sometimesdual catalytic converters, requiring significantly more platinum on a car-for-car basis. Devoid ofincentives, the trend in China this year has been for mid-size and larger vehicles. Ford reportedsales up 15 percent overall, but up 33 percent for its midsized Focus, whereas Mercedesreported remarkable sales growth in large part because of a demand surge in their largestS-class saloons, which were up 41 percent, and SUVs up 100 percent.Chinas commercial vehicle sales, however, are down nearly 5 percent through August andproduction down 7 percent, supporting the more widely accepted trend that industrial growth isslowing in China, but has yet to filter through to consumption.With the US flirting with recession and at best facing weak consumer demand while the housingmarket remains depressed and parts of Europe already in recession likely to depress growthamong the stronger core states next year auto growth is not going to be strong in Westernmarkets. Unless China decides to loosen monetary policy and re-stimulate the economy, amove they could take if growth appears to slow too much, automotive sales are not looking tobe the savior for platinum that they were in 2009-2010. Many observers, Standard Bank amongthem, see the next move as down.By. Stuart Burns(www.agmetalminer.com) MetalMiner is the largest metals-related media site in the USaccording to third party ranking sites. With a preemptive global perspective on the issues,trends, strategies, and trade policies that will impact how you source and/or trade metals andrelated metals services, MetalMiner provides unique insight, analysis, and tools for buyers,purchasing professionals, and everyone else for whom metals and their related markets matter.

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