Platinum, palladium to hitch a ride on rosy auto sales forecast and deep cuts in supply

Bloomberg reports carmakers will use a record 3.82 million ounces or $7 billion of platinum in catalytic converters next year – 17% more than this year – diminishing oversupply to 81,000 ounces from 295,000 ounces.

Helped by the first contraction in mine output – albeit a slight 1% – since 2008 according to Barclays Capital, prices will average $1,845 an ounce in the fourth quarter of 2012, 23% more than now, the median of 12 analyst estimates compiled by Bloomberg.

Barclays Capital anticipates a shortage of 272,000 ounces of palladium next year, compared with a surplus of 760,000 ounces in 2011.

LMC Automotive, which recently bought JD Powers’ forecasting business, predicts globally automakers will sell a record 79.5 million cars and light commercial vehicles in 2012.

While European sales are predicted to fall US monthly sales figures could reach an annnualized 14 million by mid-2012, up from an upwardly revised 12.7 million this year. Reuters reported last month China, the world’s largest automobile market, is likely to see car demand grow between 3–10% percent in 2012, compared with about 5–6% expected for this year and down from 33% in 2010.

Platinum for January delivery on the Nymex exchange was trading flat at $1,521 an ounce. The precious metal hit a 2011 high on August 22 of $1,915, but has recovered from a low of $1,472 at the start of October. March futures in palladium, also used in catalytic converters, extended its 13% rally of last week, the most since October 2008, to trade at an intra-day high of just under $690. By 7:30am EST the metal had fallen back to $680.

MINING.com reported earlier this week South Africa’s biggest mine union sealed a 2-year wage deal with Lonmin, averting a possible strike against the world’s third largest platinum producer. World number one and two Anglo American Platinum and Impala Platinum clinched similar deals earlier this year, significantly removing threats of labour unrest to 75% of the global production. South Africa together with Russia account for almost 90% of global output.