The most recent in -depth report on the state of the PGM markets by Johnson Matthey projects a deficit for most PGMs in both 2012 and 2013. The recent strikes in South Africa have severely crippled production to such an extent that previous surpluses have now been transformed into deficits for platinum, palladium and rhodium. What is most striking about the report however is the statement that market balances will completely depend on the ability of the recycle market to deliver material. This statement should strike fear into the hearts of auto manufacturer purchasing agents worldwide. Dependence on a disjointed network of recyclers for market balance, is not indicative of a secure supply chain.
This tenuous supply situation is not relegated wholly to the PGM’s however, as we see recycle make up a significant part of the overall supply picture in a wide number of metals. This fact that this has not caused problems is not a function of the efficiency of the recycle loop, but rather a function of the current state of weak global demand across a number of these markets. It is not hard to envision a nightmare scenario in which normalized demand leads to severe supply shortfalls as the recycle portion of supply is unable to ramp up sufficiently.
The Informed Contrarian 