POLL-Palladium's premium safe as platinum braces for worst year since 2004
* Palladium seen at $993/oz this year, $1,025/oz next year
* Platinum seen averaging $882/oz in 2018, $875/oz in 2019
* Individual forecasts
By Peter Hobson and Sumita Layek
LONDON, Oct 29 (Reuters) - Palladium's price premium overplatinum will widen next year, with palladium set for its bestyear on record while platinum slumps to its worst performancesince 2004, a Reuters poll showed on Monday.
Shortages of palladium and surpluses of platinum haveflipped the usual hierarchy between the two metals, both used incatalytic converters to reduce vehicle emissions.
Palladium is now trading at around $1,100 an ounce afterlarge deficits, tight supplies and resurgent interest fromspeculative investors sent prices rocketing almost 40 percentfrom a mid-August low to an all-time peak of $1,150.50 on Oct.23. While it won't maintain those levels, palladium will average$1,025 in 2019 and $993 this year, its best two years on record,a poll of 29 analysts and traders conducted this month found. "Rising gasoline car sales and tighter emissions limitspoint to even higher palladium autocatalyst offtake in thecoming years," said Societe Generale analyst Robin Bhar.
Added to that, Bhar said, palladium is set for an eighthsuccessive supply shortfall in 2019 and stockpiles are falling.
Expectations have barely shifted from a similar poll threemonths ago, which foresaw averages of $1,016 in 2019 and $1,000this year.
Some analysts cautioned against being too bullish, notingspeculators who have bet on higher prices could turn against themetal as quickly as they embraced it. "Trade tensions remain the key downside risk for palladium,"said Daniel Hynes and Soni Kumari at Australian bank ANZ in awritten comment to Reuters.
"Gasoline cars production growth is likely to slow down inChina and the U.S., this should result in slower auto catalystdemand growth. That said, the market deficit should remain inplace, protecting the downside," Hynes and Kumari said.
The auto sector consumes around 80 percent of palladium.
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Platinum is also used in autocatalysts, but it is used morein diesel vehicles, which have lost market share since the"dieselgate" emissions scandal of 2015.
That shift away from diesel will help to push platinumprices to their lowest annual average since 2004 next year,according to the poll.
Respondents forecast an average platinum price of $875 anounce in 2019, down from $882 this year, marking the seventh andeighth consecutive years of falling prices. Platinum is trading around $830 after hitting a 10-year lowof $751.25 in August. "Demand continues to face headwinds from the diesel emissionscandal and mine supplies remain resilient, as a weak SouthAfrican rand lowers the dollar-denominated production costs,"said Julius Baer analyst Carsten Menke.
The rand has weakened 19 percent this year against thedollar, easing pressure on South African miners who producearound 70 percent of the world's mined platinum to cut outputand end a global oversupply. Platinum prices moved below those of palladium for the firsttime since 2001 last year, having over the previous 25 yearscommanded an average premium of more than $450 an ounce.
Some analysts had expected car makers to take advantage ofplatinum's lower price and use more of it in catalysts, butthere is little sign of this happening, poll respondents said.
Platinum is also used in jewellery and industry, but thechange in auto demand has had the largest effect on the metal'ssupply and demand balance.
(Reporting by Peter HobsonEditing by Pratima Desai and David Holmes)
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