PGM Market Outlook · We have made significant downward revisions to our platinum outlook since May and now see the market in sustained surplus throughout our forecast period. On

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PGM Market Outlook

Palladium in the ascendancy

14th December, 2018

ICBC Standard Bank |

Contents

PGM Market Outlook

Palladium in the ascendancy – December, 2018

Market Overview 3

Macro-Financial Backdrop 6

Demand Drivers 10

Supply Summary 16

2

Commodities Strategy

This is a marketing communication which has been prepared by a trader, sales person or analyst of ICBC Standard Bank Plc, or its affiliates (“ICBCS”) and is provided for informational purposes only. The material does not constitute, nor should it be regarded as, investment research. It has not been prepared in accordance with the full legal requirements designed to promote independence of research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

1

Market Overview


000 oz estimate

Platinum Supply 2016 2017 2018 2019 2020

South Africa 4,323 4,386 4,343 4,348 4,330

Russia 714 735 675 705 725

North America 391 360 359 383 401

Zimbabwe 475 476 479 470 470

Others 200 200 200 200 200

Total primary supply 6,103 6,157 6,056 6,106 6,126

Platinum Demand

Autocatalyst (gross) 3,381 3,305 3,174 3,164 3,222

Autocatalyst recycle -1,185 -1,302 -1,395 -1,408 -1,431

Jewellery 1,785 1,780 1,758 1,768 1,806

Chemical 581 605 617 629 642

Electronics (inc fuel cell) 225 243 251 259 271

Glass 242 229 232 236 239

Medical 217 220 229 238 247

Petroleum refining 143 155 170 187 206

Other 461 472 481 491 501

Total net demand 5,850 5,708 5,519 5,564 5,704

Primary balance 253 450 537 541 422

ETF Holdings 2,472 2,534

Change -12 62

Nymex Warehouse Stock 238 194

Change 84 -44

Other Physical Investment 461 300

Movement of stock -280 131

XPT Spot Average ($/oz) 989 950 875 775 700

actual forecast

Platinum

● We have made significant downward revisions to our

platinum outlook since May and now see the market in

sustained surplus throughout our forecast period.

● On the supply side, this reflects a slower than anticipated

move to restructuring from South African producers, as high

by-product prices and a weak Rand have cushioned margins.

● For demand, it is a combination of further downgrades to

the jewellery outlook – principally driven by current concerns

around broader Chinese consumer sentiment – and the

continued slide towards 30% market share for European

diesel sales.

● Although the growth of fuel cells and increased substitution

towards platinum should cushion demand over time, there is

no short-term demand catalyst likely to tighten the market.

Until production is rationalised, we expect investors to remain

underweight or even short the metal, as they have been in the

futures market during 2018.

4

PGMs Outlook Commodities Strategy

Source: PwC Autofacts, LMC Automotive, Johnson Matthey, SFA, Company Reports, ICBC Standard

Investor positioning in platinum futures

Source: : CME, CFTC, Bloomberg, ICBC Standard

0

10

20

30

40

50

60

70

80

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Platinum Investor Longs Platinum Investor Shorts


000 oz estimate

Palladium Supply 2016 2017 2018 2019 2020

South Africa 2,476 2,522 2,499 2,487 2,477

Russia 2,618 3,030 3,128 2,740 2,780

of which stock sales 0 250 450 -- --

North America 1,065 982 1,052 1,130 1,208

Zimbabwe 389 386 389 382 382

Others 130 150 150 150 150

Total primary supply 6,679 7,070 7,217 6,889 6,997

Palladium demand

Autocatalyst (gross) 8,006 8,229 8,363 8,546 8,761

Autocatalyst recycle -1,856 -2,162 -2,278 -2,407 -2,614

Electronics 502 415 403 390 379

Chemical 435 460 458 455 453

Dental 445 395 379 364 349

Jewellery 187 160 158 155 153

Other 106 100 100 100 100

Total net demand 7,825 7,597 7,582 7,604 7,581

Primary balance -1,147 -527 -365 -715 -584

ETF Holdings 1,720 1,253

Change -630 -468

Nymex Warehouse Stock 73 41

Change -11 -32

Other Physical Investment 1 2

Movement of stock -506 -30

XPD Spot Average ($/oz) 614 871 1,025 1,350 1,500

actual forecast

Palladium

● We have made several changes to the supply-demand balance

since our previous update in May but the message remains

unchanged: a substantial fundamental deficit should keep

outright prices high and the forward curve backwardated .

● This is all the more so, given prices have made new all-time

highs in recent weeks even without investors’ futures

market length returning to late 2017/early 2018 highs.

● In terms of supply changes, we have tweaked our mine

numbers to reflect latest company guidance but the only

substantial shift comes from including the Global Palladium

Fund’s sales.

● On the demand side, despite small downward revisions to

auto sales, we have lifted autocatalyst forecasts on account

of bringing forward increased loadings related to the

implementation of China6. Against this, higher prices should

drive substitution away from palladium in other industries.

5



Investor positioning in palladium futures

Source: : CME, CFTC, Bloomberg, ICBC Standard

0

5

10

15

20

25

30

35

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Palladium Investor Longs Palladium Investor Shorts

2

Macro-Financial

Backdrop


Global growth has missed expectations in 2018, US dollar has been strong

● Following a relatively robust Q1, global growth in 2018 has

consistently, if not dramatically, missed expectations over the

remainder of the year.

● Initially, growth was steady but instead of then delivering a widely

anticipated synchronous global acceleration, growth moderated

● Consequently, in October the IMF downgraded their GDP forecasts

by 0.2% for both 2018 and 2019. The depth of financial and

commodity markets’ corrections, however, implied that

investors were discounting a more significant slowdown.

● Rising concerns about the potential impact of a US-China trade

war, heightened volatility in emerging markets , and softer

Eurozone growth catalysed a sizeable shift in investor positioning.

● Furthermore, the fact that the US has been the only major region to

meet or beat growth expectations has marked a complete reversal

of the macro backdrop of 2017.

● As discussed in our recent gold market outlook1, this relative

growth divergence has seen the US dollar outperform on a cross-

currency basis.

● In addition to the more recent weakness in developed market

equities, this dollar strength has presented a substantial headwind

to commodity prices in 2018.

●

7


But the US has been a relative outperformer

Source: Citi, Bloomberg, ICBC Standard

●

Global growth has broadly disappointed expectations in 2018

Source: Citi, Bloomberg, ICBC Standard

1: https://www.icbcstandardbank.com/CorporateSite/ResearchStrategy/Reports

-30

-15

0

15

30

45

60

52.5

52.9

53.3

53.7

54.1

54.5

54.9

Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18

Global Composite PMI Global Surprise Index (rhs)

-150

-100

-50

0

50

100

150

200

Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18

Spread between US and EM surprise indices

Spread between US and EUR surprise indices

US relative underperformance

vs. expectations

US relative outperformance vs.

expectations

https://www.icbcstandardbank.com/CorporateSite/ResearchStrategy/Reports




With investors cutting commodities exposure, as risk assets underperform

● On the back of this, investors have substantially reduced their

exposure to commodities. To illustrate this, CFTC data show a

646k lot reduction in combined gold, copper and WTI crude

positioning since January’s recent peak.

● Putting this in US dollar terms to also account for reduced prices,

investors’ notional exposure to these three major commodities

declined from $68bn in January to a November trough of $6bn.

● In this context, Platinum’s weak performance is not anomalous

but palladium’s strong second half rally is all the more striking.

● Far from being a financial market phenomenon then, we think this

divergent performance is justified by fundamentals. A point which

is supported by palladium’s currently elevated lease rates.

●

8


But palladium’s outperformance supported by tight forwards

Source: Bloomberg, ICBC Standard

●

Investors’ have drastically reduced their commodities exposure

Source: CME, CFTC, Bloomberg, ICBC Standard

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Combined Net Investor Positioning (k lots) in Gold, Copper and WTI…

With risk assets under pressure across the board (ytd perf)

Source: : CME, MSCI, ICE, LME, S&P, Bloomberg, ICBC Standard

-5

0

5

10

15

20

25

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Platinum 3M Palladium 3M

Lease Rate (%)


A more cautious FOMC should offer some support to metals

● As markets approach 2019, major macro drivers are out-of-sync.

● On the FX side, as detailed in our recent gold market outlook1, we

think that a combination of factors will make the FOMC

incrementally more cautious in its approach to rate hikes:

− Short-term real rates approaching current estimates of their

equilibrium level (r*).

− A weaker oil price potentially curbing corporate investment and

industrial production growth – via slower growth in energy

extraction.

− Concerns about the pass through effect of higher rates on

consumer sentiment and spending.

● This should result in an incrementally weaker dollar and thus

counter one of the major headwinds to commodity prices.

● Against this, however, it remains too early to call a bottom of the

current Chinese growth cycle. This is due to ongoing domestic de-

leveraging, with non-bank lending continuing to contract in

November and aggregate money supply growth consequently

sliding towards negative territory.

● In combination with the trade war’s apparent negative impact on

consumer sentiment, this is a clear threat to metals consumption,

most prominently for PGMs through weaker auto sales. A point

taken up in more detail in the demand section below.

● Although the political rhetoric around this has shifted, particularly

with regard to increased lending for the private sector, the data is

yet to deliver a more positive message.

● Until that is the case, industrial metals will be without a clear

macro tailwind at their backs.

●

9


Slowing money supply points to a soft Q1 for China

Source: China NBS, PBoC, Bloomberg, ICBC Standard

●

US real interest rates approaching their estimated equilibrium

Source: NY Fed, Bloomberg, ICBC Standard

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Real Short-term Rate Natural Rate (r*)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

M1 Growth YoY Nominal GDP YoY

1: https://www.icbcstandardbank.com/CorporateSite/ResearchStrategy/Reports




3

Demand Drivers


Palladium benefits from China regulations and diminished European diesel

● In many ways, the divergent fortunes of platinum and palladium

can be summed up by the current and projected autocatalyst

demand developments in Europe and China, forecast to be the

two metals’ respective largest end use regions in 2019.

● For 2018, estimated palladium net demand growth of 134koz

has been driven by another year of consumers shifting from

diesel to gasoline in Western Europe (+60koz) and the broader

expansion of gasoline dominated emerging market auto sales

(+90koz). This comes despite an estimated 2% decline in China’s

full year auto sales and reflects increased Chinese loadings from

the completion of the roll-out of China 5 standards plus strong

sales growth in India (+11%) and other Asian emerging markets.

● For 2019 and 2020 Chinese demand should take centre stage,

rising by 136koz and 145koz respectively. This forecast is not

predicated on a strong rebound in auto sales – we forecast growth

of 1.5% y/y for both years, on the assumption that a potential

purchase tax cut and looser credit will support consumer activity –

but rather stems from the impending implementation of China 6a

(by July 2020) and, ultimately, China 6b (by July 2023).

● Given the commercially sensitive nature of autocatalyst loadings

and lack of publicly available information, these estimates come

with a wide margin of error but it does seem more likely that

loadings will rise by 20-30% than by 5-10%. In light of smaller

average engine sizes, we do not expect PGM loadings to reach US

levels, for example, but even allowing for thrifting it is reasonable

to assume that total loadings will head towards 3g/vehicle.

● In terms of the timing, we expect a combination of roughly six

month fabrication lead times and new models complying from

launch to mean that this demand will become apparent in 2019,

with some forward buying likely already being felt in the market.

●

11


Palladium autocatalyst demand growth by region


●

Major regional demand drivers have diverged

Source: CAAM, China NBS, Bloomberg, ICBC Standard

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

China Palladium Demand (koz/yr) Euopean Platinum Demand (koz/yr)

-100

-50

0

50

100

150

200

250

300

2017 2018 2019 2020

Europe Japan N. America China India RoW


A sharp contraction in auto sales the major risk to bullish base case

● Given our projection of continued significant deficits for palladium,

it is important to consider what could de-rail the market’s bull

story. We see three clear risks to demand:

− A significant and sustained slowdown in China’s auto sales, on

the back of faltering consumer confidence

− A sharp pull back in US auto sales, as rising financing rates

deter consumers

− A much faster than anticipated increase in substitution away

from palladium and towards platinum.

● Regarding the first two issues, a 1% change in either US or Chinese

demand is equivalent to just over 20koz of palladium. So, holding

all other assumptions equal, a balanced market would require a

scenario whereby US auto sales fall 10%, Chinese auto sales fall

15% and there being no increase in Chinese loadings.

● While such a scenario is not impossible to conceive, it is clearly

more of a tail risk than base case. Furthermore, in this instance,

lower palladium prices would likely slow the pace of demand

destruction in other industrial and dental uses.

● At a spot price spread approaching $500/oz, there is evidently an

incentive for OEMs to consider substitution, replacing palladium

with platinum. However, we do not think that has become a major

feature of the market yet. We maintain the view that substitution

will be incremental, i.e. catalysts with higher platinum/lower

palladium loadings will only be introduced on new models and that

changes to emissions systems on existing models are unlikely.

● Moreover, considering the current R&D focus on EVs and the fact

that medium-term PGM supply expansions in Russia and South

Africa are palladium rich, we do not believe that OEMs are

currently overly concerned about security of palladium supply.

●

12


●

Chinese auto sales turn negative in H2 2018

Source: CAAM, China NBS, Bloomberg, ICBC Standard

-20%

-10%

0%

10%

20%

30%

40%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014 2015 2016 2017 2018

Million Vehicles

YoY % 3mma (right axis) China - Passenger Vehicle Sales

0

5

10

15

20

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Weighted Average Financing Rate of Financing Companies' New Car Loans

US Auto Sales (Annualised, SA, rhs)

US auto sales under pressure, as financing rates move higher

Source: WARD’s Automotive, Federal Reserve, Bloomberg, ICBC Standard


WLTP muddies the European outlook for platinum

● Substitution back towards platinum should, at the margin, be a

cushion to other negative headwinds in Europe and lead to

incremental demand growth in China, albeit from a very low base.

However, we do not see it materially shifting the demand picture.

● For 2018, falling European diesel share remains the dominant

demand feature, accounting for a 165koz slide in platinum

demand. In October, diesel engines accounted for 34.3% of

Western European auto sales, according to LMC automotive, with

the full year 2018 figure likely to come in around 36%. That is

down from 45% a year ago.

● For 2019, we forecast a further 48koz decline in European

platinum demand, as diesel’s market share begins to bottom out

around 30%.

● The outlook for auto sales and loadings is clouded by recent data

distortions following the introduction of increased loadings on

the back of Worldwide Harmonised Light Vehicle Test

Procedures (WLTP) being introduced.

● Although this has applied to new models since 2017, it was only

from September 2018 that all European models were included. As

a result, dealers heavily incentivised sales of old models in front of

the new rules coming into full force – hence August registrations

rising 31% y/y, before September’s crashed -24% y/y.

● In our base case, we assume European sales growth of 2% over

2019 and 2020 combined, which, with the addition of higher

loadings, should see platinum demand stabilise in 2020.

● In terms of loadings, under Euro6 WLTP + RDE (real driving

emissions) tests, by 2021 vehicles will need to produce less than

80mg/km of NOx in the lab and 120mg/km of NOx on the road.

●

13


Eurozone new car registrations distorted by WLTP introduction

Source: ACEA, Bloomberg, ICBC Standard

●

Platinum autocatalyst demand growth by region


-30%

-20%

-10%

0%

10%

20%

30%

40%

2008 2010 2012 2014 2016 2018

Eurozone New Car Registrations

-200

-150

-100

-50

0

50

100

2017 2018 2019 2020

Europe Japan N. America China India RoW


Automakers still face the challenge of multiple emissions targets

● The extent to which these figures will be reached through Lean NOx

Traps (LNT), Selective Catalytic Reduction (SCR) or Exhaust Gas

Recirculation (EGR) technology1 (or a combination of all three) is

very uncertain. If LNT dominates, it would present an upside

scenario to our base case but we currently assume only a

marginal boost to loadings as other, non-PGM bearing, technology

options appear to be setting the pace.

● In terms of the broader emissions challenge, we believe that

hybrids will need to take greater market share into the 2020s,

given the requirement for fleet average CO2 emissions to fall below

95g/km and the cost, performance and infrastructure challenges

associated with mass adoption of pure battery EVs.

● Using the example of Porsche’s Cayenne2, the E-hybrid model

achieves CO2 emissions of 78g/km, compared to the gasoline

model’s 209g/km. It is this potential for hybrids to bridge the gap

to a lower carbon future that means significant PGM demand

destruction by EVs sits well beyond our current forecast window.

● In terms of other alternative power train technologies, fuel cells

have been garnering more attention recently but it should be

noted that they only accounted for c.40koz of Platinum demand

in 2017, of which less than half was for vehicles.

● Given China and Japan’s aims of adding 250k vehicles combined

by 2025, and estimates that current loadings approaching 20g are

only likely to be thrifted closer to 10g, this could become a

significant source of Pt demand but only in the long run.

● The heavy duty diesel market has been one of the few bright spots

for platinum, with USA and Chinese truck and bus sales

respectively up 19% and 9% y/y year-to-date.

14


HDD a relative bright spot but total market size still small

Source: US BEA, Bloomberg, ICBC Standard

●

Global vehicle assembly by power train

Source: PwC Autofacts, ICBC Standard

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

30%

35%

40%

45%

50%

55%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Combustion Gasoline Combustion Diesel

PEV+PHEV (Electric, rhs) Hybrid (Mild+Full, rhs)

1: discussed in our previous PGM outlook - https://www.icbcstandardbank.com/CorporateSite/ResearchStrategy/Reports

2: https://www.porsche.com/uk/models/cayenne/

0.0

0.1

0.2

0.3

0.4

0.5

0.6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Heavy Truck Sales, Ann'd SA




https://www.porsche.com/uk/models/cayenne/

https://www.porsche.com/uk/models/cayenne/


Jewellery market still struggling as ETFs turn net-suppliers

●

●

15


Pd ETF liquidation continues, while Pt holdings drift lower


●

SGE cumulative annual platinum volumes

Source: SGE, Bloomberg, ICBC Standard

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Palladium ETF Holdings Platinum ETF Holdings

● Turning to the final sector capable of swinging the platinum

balance, we have downgraded our jewellery demand figures for

China, anticipating a 3% decline this year, flat consumption in

2019 and then 2% growth in 2020.

● Although SGE traded volumes are flat year-to-date, this seems to

better reflect steady industrial demand than a firm jewellery sector.

Indeed, although bridal demand is reported to be healthy, self-

purchase and gifting have weakened in-line with more cautious

consumer sentiment. In addition to which, platinum continues to

suffer from its discount to the gold price.

● In essence, we think jewellery demand will be pro-cyclical with

the price, lagging a tightening of the industrial market as steadying

prices will themselves reassure consumers. Hence our view that

improved demand is at least another year away.

● For Indian demand, we expect growth to hold above 10% p.a.,

breaching the 200koz/yr level in 2019. Clearly this is a positive for

the market but, on a global basis, we do not see jewellery moving

beyond its recent 1,750-1,800koz range within the current

forecast period.

● Finishing off on potential sources of demand, it is worth

highlighting that ETFs have actually been a source of net supply

to the PGM markets this year. In palladium, the 530koz ytd

liquidation appears to be have been driven by a combination of

profit taking and the fact that ETF holders do not benefit from the

forward curve’s backwardation. In platinum, the 230koz ytd

reduction in ETF holdings is more likely a case of dollar-

denominated investors cutting their losses.

0

20

40

60

80

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2018 2017 2016

2015 2014 2013

4

Supply Summary


Platinum supply summary

● In terms of the traditional sources of supply, we estimate that

growth in recycling volumes (+93koz) will again have made a

meaningful contribution in 2018 but that this will slow to

increments of closer to 20koz in 2019 and 2020.

● This anticipated slowdown in growth is driven by reduced recycling

incentives at lower prices, the lagged effect of reduced demand

growth in the early 2010s and the absence of a bump from

scrappage schemes. If diesel scrappage were more heavily

incentivised again, our numbers would need to be revised higher.

● On the mine supply front, after limited disruptions to South African

production, we have decided to change our base case model to

one which no longer presumes any slippages. There are now

greater downside risks to our supply numbers but we believe this

gives a cleaner view of the base case supply-demand outlook.

● In South Africa we project flat production for the next two years.

This reflects the ramp-ups of Booysendal and Styldrift being

offset by a return to marginally lower grades at Mogalakwena

and, in 2020, Impala’s restructuring starting to kick-in.

● For Impala, the ramp up of shafts 16 and 20 should mean that

2019 output holds close to 2018 levels but through 2020, as the

number of total operating shafts declines towards 6 (from 11

currently), volumes will fall.

● We do not currently make any assumptions about volumes from a

post-merger combined Sibanye/Lonmin entity but note that

volumes are likely to decline in the 2020s, if not sooner.

● In the meantime, the elevated basket price – driven by a weaker

Rand and high Palladium and Rhodium prices – is keeping even

the highest cost miners’ heads above water for now.

●

17


Rand basket price has cushioned platinum miners’ margins


●

Platinum supply growth by region

Source: Company Reports, ICBC Standard

-150

-100

-50

0

50

100

150

200

250

2017 2018 2019 2020

South Africa Russia North America Zimbabwe Autocatalyst Recovery

0

500

1,000

1,500

2,000

2,500

0

4,000

8,000

12,000

16,000

20,000

2008 2010 2012 2014 2016 2018

Rand PGM Basket USD PGM Basket


Palladium supply summary

● In-line with the platinum forecast, no material growth is anticipated

from South Africa within the next two years. In fact, there is some

risk of a downside surprise to supply across the PGMs if current

AMCU strikes in the Gold sector were to spread. This is not our

base case but, given the already announced Impala retrenchments

and potential for significant Sibanye/Lonmin lay offs, this will need

to be monitored closely in 2019.

● From North America, Blitz should add 70koz in 2019 and 60koz

in 2020, while North American Palladium add a further 20koz over

the two years on account of their revised Lac des Iles mine plan.

● After declining by 100koz in 2018 – due to reconfiguration of feed

to the Harjavalta smelter – Norilsk’s production should recover on

the back of operational efficiency improvements over 2019 and

2020.

● For more substantial growth of up to 900koz in total PGMs, as

outlined at the company’s recent strategy day, the market will have

to wait until the mid-2020s. In particular, the South Cluster

expansion is currently slated for post-2022, while the potential

joint-venture volumes with Russian Platinum are beyond 2025.

● In the meantime, however, the Global Palladium Fund is providing

additional volumes to the market. Indeed, the company reported

that it has delivered c.1Moz to customers since inception in 2017.

For 2019 we do not include estimates of net sales in our balance

but have assumed figures of 250koz and 450koz for 2017 and

2018 respectively.

● As well as potential Russian expansions, palladium-rich Northern

Limb projects should change the market balance in the 2020s.

In addition to new Waterberg and Ivanplats mines, Amplats are

assessing a Mogalakwena expansion that would add 270koz Pd.

Until then, the market will remain heavily dependent on high prices

incentivising inventory sales and growth of recycling volumes.

●

18


Palladium market balance


●

Palladium supply growth by region

Source: Company Reports, ICBC Standard

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

2016 2017 2018 2019 2020

Primary balance Movement of stock

-200

-100

0

100

200

300

400

500

600

2017 2018 2019 2020

South Africa Russia North America Zimbabwe Autocatalyst Recovery


Disclaimer

This is a marketing communication which has been prepared by a trader, sales person or analyst of ICBC Standard Bank Plc, or its affiliates (“ICBCS”) and is provided for informational purposes only. The material does not constitute, nor

should it be regarded as, investment research. It has not been prepared in accordance with the full legal requirements designed to promote independence of research and is not subject to any prohibition on dealing ahead of the

dissemination of investment research.

Additional information with respect to any security, commodity or other financial instrument, referred to herein may be made available on request. This material is for the general information of institutional and market professional clients

of ICBCS and should not be considered to be investment advice. It does not take into account the particular investment objectives, financial situation or needs of individual clients. The information, tools and material presented in this

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we consider reliable, but ICBCS does not warrant or represent (expressly or impliedly) that it is accurate, complete, not misleading or as to its fitness for the purpose intended and it should not be relied upon as such. The information and

opinions contained in this document were produced by ICBCS as per the date stated and may be subject to change without prior notification. Opinions expressed are our current opinions as of the date appearing on this material only. We

endeavour to update the material in this report on a timely basis, but regulatory compliance or other reasons may prevent us from doing so.

Any forward-looking information contained herein has been prepared on the basis of a number of assumptions which may prove to be incorrect. Therefore, actual future results and trends may differ materially from what is forecast,

suggested or implied due to a variety of factors. To the extent that this material contains any forecasts in relation to the price of a specific financial instrument, this is not a guarantee of future performance and involves certain risks and

uncertainties which are difficult to predict. Changes in interest rates and rates of exchange may have an adverse effect on the value or price of these instruments. Past performance is not a guide to future performance. A list of any

previous forecasts in relation to the same financial instrument produced within the preceding twelve month period is available on request.

ICBCS or its employees may from time to time have long or short positions in securities, commodities, warrants, futures, options, derivatives or other financial instruments referred to in this material. ICBCS does and seeks to do business

with companies covered in this communication. As a result, investors should be aware that ICBCS may have a conflict of interest that could affect the objectivity of this communication. Investors should consider this communication as only

a single factor in making their investment decision.

None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of ICBCS. All trademarks, service marks and logos

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Information and opinions presented in this communication were obtained or derived from sources ICBCS believes are reliable, but ICBCS makes no representations as to their accuracy or completeness. Additional information is available

upon request. ICBCS accepts no liability for loss, either directly or indirectly, arising from the use of the material presented in this communication, except that this exclusion of liability does not apply to the extent that liability arises under

specific statutes or regulations applicable to ICBCS.

The services, securities and investments discussed in this material may not be available to nor suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial

resources, and if necessary, should seek professional advice. It should be noted that investment involves risk, including, but not limited to, the risk of capital loss. Past performance is no guide to future performance. In relation to

securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable, of such securities. Some investments discussed in this marketing communication may have a

high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some

investments, the potential losses may exceed the amount of initial investment, and in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in

consequence, initial capital paid for such investments may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realize those investments, similarly it may prove difficult for

you to obtain reliable information about the value, or risks, to which such an investment is exposed.

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Disclaimer Continued

In Europe, this communication is distributed by ICBC Standard Bank Plc. 20 Gresham Street, London EC2V 7JE which is authorised by the Prudential Regulation Authority (“PRA”) and regulated by the PRA and the Financial Conduct

Authority (“FCA”), and is provided to Professional Investors only.

In Hong Kong, this communication is distributed by ICBC Standard Bank Plc, Hong Kong Branch, and is intended solely for use by Professional Investor (as defined in the Hong Kong Securities and Futures Ordinance and its subsidiary

legislation) clients and prospective clients of members of ICBC Standard Bank Plc Group. This communication may not be relied on by retail customers or persons to whom this communication may not be provided by law. All enquiries by

recipients in Hong Kong must be directed to an ICBC Standard Bank Plc, Hong Kong Branch contact. ICBC Standard Bank Plc, Hong Kong Branch is a fully licensed bank under the Banking Ordinance and is a registered institution under

the Securities and Futures Ordinance in Hong Kong. Any investments and services contained or referred to in this presentation may not be suitable for you and it is recommended that you consult an independent investment advisor if you

are in doubt about such investments or investment services.

In Singapore, the provision of Financial Advisory Services is regulated under the Financial Advisers Act (Cap. 110). Accordingly (and where applicable), this material is provided by ICBC Standard Bank Plc, Singapore Branch pursuant to

Regulation 32C of the Financial Advisers Regulations. The material contained in this document is intended solely for Accredited Investors, Expert Investors, or Institutional Investors, as defined under the Securities and Futures Act (Cap.

289) of Singapore. Recipients in Singapore should contact an ICBC Standard Bank Plc, Singapore Branch representative in respect of any matters arising from, or in connection with this material. ICBC Standard Bank Plc, Singapore Branch

is regulated by the Monetary Authority of Singapore.

If distributed into the United States, this communication is issued by a member of the sales and trading department of ICBCS. Sales and trading department personnel are not research analysts, and the information in this communication

is not intended to constitute “research” as that term is defined by applicable regulations. Unless otherwise indicated, any reference to a research report or research recommendation is not intended to represent the whole report and is not

in itself considered a recommendation or research report. All views, opinions and estimates expressed in this communication (i) may change without notice and (ii) may differ from those views, opinions and estimates held or expressed by

ICBCS or other ICBCS personnel. This communication is being provided to you without regard to your particular circumstances, and any decision to purchase or sell a financial instrument must be made by you independently without

reliance on ICBCS. Any decision to purchase or subscribe for any financial instrument in any offering must be based solely on existing public information on such financial instrument and not on this communication. This material is not

intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person. This communication is for informational purposes only

and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of ICBCS, or any of its affiliates. While every care has been

taken in preparing this communication, no representation, warranty or undertaking (express or implied) is given and no responsibility or liability is accepted by ICBCS, its subsidiaries, holding companies or affiliates as to the accuracy or

completeness of the information contained herein. All opinions and estimates contained in this communication may be changed after publication at any time without notice. Any included projections, opinions, assumptions or estimates are

for example only, and they may not represent current or future performance. The information in this communication may not be updated or otherwise revised. Members of ICBCS, their directors, officers and employees may have a long or

short position in the instruments mentioned in this communication or related investments, and may add to, dispose of or effect transactions for their own account and ICBCS may perform or seek to perform advisory or banking services in

relation thereto. This communication is not intended for the use of private or retail customers. Any communication may be inconsistent, and reach different conclusions, with other ICBCS communications. ICBCS is under no obligation to

bring such communications to the attention of recipients of this information.

In Canada, any offer or sale of the securities described herein will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered

under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. Under no circumstances is the

information contained herein to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an

issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada or, alternatively, pursuant to a dealer

registration exemption.

In jurisdictions where ICBCS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require

that the trade be made in accordance with applicable exemptions from registration or licensing requirements.

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ICBC Standard Bank Plc | Financial Markets and Commodities

20 Gresham Street | London EC2V 7JE, United Kingdom

Documents

PGM Market Outlook · We have made significant downward revisions to our platinum outlook since May and now see the market in sustained surplus throughout our forecast period. On