Dollar rallies palladium, but auto industry woes set the tone
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Weak auto sales weigh down palladium's rebound
By Leia Michele Toovey- Exclusive to Palladium Investing News
Palladium prices rallied on Monday, as the weaker dollar encouraged a recovery in the commodities prices after heavy losses last week. Bargain hunting after last weeks lowest price point was hit drove spot palladium to an intraday high of $197 an ounce, more than a five per cent rally. At notional close on Friday, palladium was trading at $169.50 an ounce. The metal, used in auto catalysts and jewellery, tumbled as low as $161 last week on fears that a global recession would cut demand. Prices have fallen from a high of $582 an ounce, and its PGM partner platinum has fallen from $2,273 to $880 an ounce.
The global economic slowdown is plaguing the precious metals, and any upward momentum even if it comes as small hops and skips is more than welcome. However, fear of the intensity of the US, European, and Asian recession is still setting the tone; and the equity markets have plunged and demand is slowing across all sectors. Dropping oil prices are not in favour of the palladium prices, light sweet crude has seen a recent plunge after rocketing up to new highs just this summer. OPEC has a November meeting planned in which they will discuss curbing output. If they do cut output, oil prices should rise, and most likely palladium will follow suit.
Palladium and platinum have both taken big hits due to the health of the auto economy. In the US, between September 2007 and September 2008, car sales fell by 26.6 per cent, and the trends in Europe are not looking any better. About half of the palladium and platinum produced in the world is used by the auto industry. To reduce the risk of price volatility and supply disruptions, automakers normally maintain a stockpile of PGM metals equivalent to about six month to one year’s consumption. Recently, their stockpiles have stagnated and therefore palladium users have not been seeking replenishing.
Company news
Low commodity prices are taking their toll in Eastern Canada. North American Palladium Ltd.. (TSX.PDL) said Tuesday it is shutting down production at its Lac des Iles mine near Thunder Bay, leaving 350 workers without jobs. The palladium mine, accounting for four per cent of world output, is operating “well below break even” because of slumping metal prices, the company said. North American said the temporary closure of the mine will enable it to conserve cash and decide on future strategy. Last week, Montreal’s Blue Note Mining decided to shut down its Caribou zinc mine in New Brunswick because of low metal prices.
Impala Platinum (JSE:IMP) has won the overall winner at the stainless steel awards. Impala’s massive new autoclave is what helped the company grasp the title, as the autoclave was described by industry experts as a breakthrough in the leaching process in the mining industry. These annual awards have been ongoing since 1998 and according to many is the highlight of the stainless steel industry. The Impala plat is still waiting on a takeover bid from major producer Anglo Platinum. In the meantime, Impala is trying to push through its own takeover of Mvelaphanda Resources and Northam Platinum.
Tags: anglo, auto industry, automakers, commodities, commodities prices, commodity prices, dollar, futures, global economic slowdown, investing, investing news, light sweet crude, metals, North American Palladium, oil, palladium, palladium investing, palladium prices, pgm, platinum, precious metals, prices, spot, stockpiles
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October 22nd, 2008 at 7:20 am
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