The Nymex net length was virtually unchanged in the week to February 21 when funds/CTAs carried out a near-equal volume of long liquidation and short covering. The net length stands at 39,642 contracts, up 14,228 contracts or 56% in the year to date. But while there has been a modest rise in speculative longs, the recent price strength is still heavily dependent on short covering. But with open shorts at the lowest since August 2014 – during protracted industrial action by South African mine workers – the metal is vulnerable to a sell-off triggered by the return of short selling unless speculative bulls re-engage and enable prices to vault the $1,020-30 per oz resistance band.
ETF holdings are at a 2017 high of 2.37 million oz, following recent demand from US-listed investors.
Vehicle sales globally recorded strong growth last year, supporting rising demand for emission-control devices. Passenger vehicle sales in the three largest markets (the USA, China and the EU) increased 8.5% in 2016 to 56.5 million vehicles. Chinese passenger vehicle sales surged by 13.7% on the previous year, supported by the tax break on small vehicles, according to the China Assn of Automobile Manufacturers. Sales in Europe also enjoyed strong growth last year, rising 6.8% year-on-year. But we believe sales will grow far more modestly in 2017; sales in China are forecast to climb a further 5% in 2017 to 29.4 million vehicles, while sales in Europe are forecast to grow only 1% due to political and economic uncertainties. Sales in the USA contracted by 1.8% year-on-year in January, while passenger vehicle sales in China contracted by 1.1%. By contrast, passenger vehicle sales in Europe increased by a strong 10.2% year-on-year in January.
Platinum continues to grapple with the fallout from the Volkswagen emissions scandal – major cities such as Paris and Madrid have pledged to ban all diesel vehicles by the middle of the next decade. The UK government is also thought to be considering a diesel scrappage scheme after receiving a final warning for failing to comply with EU air pollution limits for nitrogen dioxide.
The global platinum market will remain in a structural deficit for a sixth consecutive year in 2017, according to the latest forecast by the World Platinum Investment Council (WPIC). It sees global demand contracting by 2% to 7.84 million oz – lower automotive, industrial and investment demand will outweigh an increase in jewellery consumption. It forecasts total global supply to record a similar 2% decline, mostly owing to a drop in secondary supply, resulting in an overall deficit of 100,000 oz. The WPIC also projects platinum to record a much narrower 170,000-oz deficit this year, down from the 520,000-oz deficit it forecast previously. This reflects an upwards revision in scrap supplies due in part to higher availability from Chinese jewellery fabricators, where a destocking phase is under way, and while higher steel prices boost supply from spent autocatalysts.