Palladium Market May Have Supply Deficit, Societe Generale Says
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By Claudia Carpenter

March 31 (Bloomberg) -- Palladium production will fall 65,000 ounces short of demand next year, the first deficit in at least five years, partly because jewelers and automakers will switch from more expensive platinum, Societe Generale SA said.

That compares with a surplus of 810,000 ounces this year and 691,000 last year, Societe Generale analysts including London- based Stephen Briggs wrote in a report e-mailed March 28. Palladium's price forecast for this year was raised by a third to $465 an ounce, up from $350 forecast in January when it estimated a palladium surplus of 135,000 ounces for 2009.

Price forecasts for gold, platinum and silver were also raised. Gold will average $1,025 an ounce this year, up from $800 forecast in January, and silver $19.20 an ounce from $13.75. Platinum will average $2,100 an ounce, up from $1,450 an ounce.

``Platinum demand is expected to come under pressure in the jewelry market, partly as a result of a fresh marketing program for palladium'' led by the world's biggest palladium miner, Russia's OAO GMK Norilsk Nickel, the Societe Generale analysts wrote. Palladium may also benefit as automakers switch from platinum for use in diesel-fueled cars, the report said.

Palladium has climbed 21 percent this year, lagging a 33 percent jump in the price of platinum. Both metals can be substituted in applications including jewelry and auto catalysts to reduce vehicle emissions.

Motor companies will increase palladium use by 4.1 percent next year while lowering their platinum consumption by 3.9 percent, according to the report. Growth in jewelry consumption will be 6.3 percent for platinum and 5 percent for palladium.

Palladium for immediate delivery has averaged $442.30 an ounce this year while gold's average is $924.15 an ounce. Platinum has averaged $1,874.80 an ounce and silver's average is $17.539 an ounce.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

Last Updated: March 31, 2008 04:37 EDT