CPM Group has released a 2010 PGM market view, with the long term outlook for platinum, palladium, and rhodium over the next 10 years seeming most likely to be one of historically high prices. This outlook is supported by expectations of increased fabrication demand, constrained supplies, and rising investment demand as a result of these positive supply and demand fundamentals.

South Africa is the largest producer of platinum and rhodium and the second largest producer of palladium. Given the high degree of production concentration from South Africa, supply of these metals is very sensitive to issues related to mining in this country. Shortfall of resources such as electricity, skilled labor, and water, is expected to negatively affect supply from South Africa. Importantly, many of these issues are largely unresponsive to the metal price levels. None of these problems are expected to be resolved soon and are expected to add to production costs, which should be supportive of prices during the forecast period. The PGMs are largely produced as by-products in Russia and North America, with the exception of North American Palladium and Stillwater Mining, and therefore supply from these regions is largely influenced by the production of the primary metal, typically nickel and copper.

A growing global auto population, tightening emissions standards, and the lack of commercially viable substitutes for PGMs in auto catalysts is expected to bode well for the fabrication demand of these metals going forward. Auto catalysts are the largest source of demand for the PGMs, which has resulted in growing concerns over new technologies such as electric vehicles and nanotechnology. The report gives consideration to these trends and assesses their likely impact of PGM auto demand over the next 10 years. Demand from the electronics sector and other industrial sectors is expected to grow at a healthy pace during the forecast period.

China is the largest consumer of platinum jewelry. Populations in newly industrialized countries such as China are becoming more affluent. Chinese demand for jewelry is analyzed in the context of this trend.

Investment demand has always played an important role in influencing the prices of PGMs. The compelling fundamentals resulting from constrained supplies and rising fabrication demand are expected to increase investor interest in these metals, adding to the upward trend in prices. In addition to hedge funds and wealthy individuals who typically invested in these metals, the launch of physically backed platinum and palladium exchange traded funds in 2007 has accentuated the role of this particular portion of the PGM market. The report explores the workings of investment demand, the drivers behind investors’ decisions about PGMs, and investment demand trends’ long-term implications for PGM market prices.