There has been a lot of market talk this week of the possibility of palladium overtaking the price of platinum, which would mark the first time since late 2001, sources told S&P Global Platts.
Ahead of industry gathering Platinum Week London, starting Monday, there has been much discussion of the likelihood of the autocatalyst metals hitting at least parity in the near term.
"It's a question of when, not if," said one trader. However, he added that he was troubled by the fact that the cross could occur because of platinum weakness rather than palladium strength.
One banker told S&P Global Platts that the last time palladium was priced above platinum was September 12, 2001, "as palladium was collapsing down from its 'spike' up over $1,000/oz."
On his maths, and looking at charts for indicators, "if (and it's a big if) platinum holds above [its current] trend line, and if (also a big if) palladium continues to rally, then the lines would cross in mid-2018."
He cautioned that palladium is "far more exposed to an unexpected slow-down in Chinese and North American auto sales."
Palladium is used in gasoline-powered engines, while platinum in diesel.
A second banker said that he would certainly be long palladium at the moment, basis technical trends.
"To me it looks as if palladium is getting pricier, rather than platinum cheaper," he said.
He noted that roughly around 80% of global palladium production comes from Russia and South Africa.
"Not really risk free are they? For me it has to be a long palladium trade, smaller market, difficult to produce and refine," he added.
Another banker agreed, although said steam could come out of the continuing palladium rally before another leg higher.
"At that point you'll get arguments that platinum is too cheap and should be bought, which could pressure the palladium trade. Still, as soon at palladium comes off the boil, then people will argue that it is time to buy the dips," the banking source said.
Platinum was spot bid at $915/oz as of 1030 GMT Friday, with palladium at $805/oz.
"Precious metals traders who are fed-up watching the price of gold range around the $1,200 mark may be tempted to look at palladium, which for the first time since 2001 may overtake the price of platinum," said analyst Anish Lal at ADS Securities.
"With the tide turning against diesel cars this could potentially lead to an increase in the used of palladium for petrol engine catalysts, along with increased demand from China," Lal added.
Still, another banker was more skeptical, saying: "Good luck to anyone placing on that bet."
A fund manager agreed, "it's never gonna happen."
Still, the bulls appeared to outpace the bears regarding the possibility.
"It could happen at any time, such is the illiquidity in these markets. I must admit I find the outlook for platinum dire," said one high-level industry source.
"Diesel passenger vehicles are unsaleable, according to a UK car salesmen I know, and with the stock of metal driving around Europe -- and soon to be recycled -- diesel could conceivably become a net source of supply of platinum, not demand," he added.
"Also cheap platinum has damaged -- perhaps fatally -- the platinum jewellery brand in China," he continued. "The two big drivers for platinum have stalled so I can't be anything other than negative."
In a recent detailed research note, Nell Agate, precious metals analyst at Citi, told clients: "Given scrap rates are only set to increase, we believe secondary supply will form an important consideration within the wider above-ground stocks category. Driven largely by a ramp-up in autocatalyst scrap rates, roughly 25% of PGM demand in 2020 may be serviced by total re-melt supply."
Agate added that wavering platinum-based autocatalyst demand "has kept the Pt:Pd ratio near historical lows at 1.0x versus 1.3x at the start of the year."
For the week ending the May 2, money managers on COMEX turned net short on platinum for the first time on record, at minus 4,900 lots.
"Conversely, money managers maintained their relatively stretched net length position in palladium at 23,000 lots as spot palladium continues to outperform, returning [circa]20% to date, as of May 8," she noted.
