PALLADIUM MARKET TO BE CLOSE TO BALANCE IN 2010
The palladium market is forecast to be in a very small annual surplus of 45,000 ounces in 2010. Gross demand for palladium is set to rise by 15 per cent to 8.94 million ounces in 2010 on the back of strong automotive and industrial demand. Recovery of palladium from scrapped autocatalysts, jewellery and electronics will increase by 29 per cent to 1.85 million ounces. Net demand is therefore forecast to increase by 12 per cent to 7.10 million ounces.

SUPPLIES EXPECTED TO REMAIN ALMOST FLAT AT 7.14 MILLION OUNCES
Supplies of palladium are set to be almost flat at 7.14 million ounces, an increase of just 40,000 ounces compared with last year. Production from current South African, Russian and Zimbabwean mining operations is expected to rise slightly in 2010. Sales of metal from Russian state stocks are estimated to contribute around 1 million ounces to supplies this year. North American supplies are expected to drop by 26 per cent to 560,000 ounces, mostly offsetting the growth in supplies in other regions.

AUTOMOTIVE PALLADIUM DEMAND SET TO INCREASE BY 27 PER CENT
Demand for palladium in autocatalysts is forecast to increase by 27 per cent to 5.15 million ounces in 2010. Recovery of light duty vehicle production in all regions, and particularly rapid growth in production of gasoline vehicles in China, is expected to drive this increase in demand. Recovery of palladium from spent autocatalysts is forecast to increase by 37 per cent to 1.32 million ounces as a higher palladium price and car scrappage schemes stimulate recycling.

INDUSTRIAL PALLADIUM DEMAND TO BENEFIT FROM RECOVERY IN ELECTRICAL SECTOR
Gross demand for palladium in industrial applications is expected to rise by 8 per cent to 2.49 million ounces, returning close to its 2008 level. Increased consumer purchasing of electrical items is set to boost demand for palladium in multi-layer ceramic capacitors, ubiquitous in consumer electronics. Recycling of palladium from scrapped electrical devices is forecast to increase by 11 per cent driven mainly by legislation on electronic waste. Chemical demand for palladium is expected to benefit from the wider recovery in the manufacturing sector in 2010.

PALLADIUM INVESTMENT DEMAND TO REMAIN STRONG, JEWELLERY DEMAND TO FALL
Identifiable physical investment demand for palladium, particularly in exchange traded funds, is expected to rise to 670,000 ounces in 2010. Redemptions in the more mature funds are anticipated to limit the increase in new demand. Demand for palladium jewellery is forecast to fall by 19 per cent in 2010 to 630,000 ounces, with most of the decline due to weaker trade interest in China.

PALLADIUM PRICE TO BE SUPPORTED BY FUNDAMENTALS AND INVESTMENT
With steadily increasing automotive and industrial demand, the outlook for palladium is mainly positive. However, concerns around sovereign debt and austerity measures in developed countries could temper economic growth. China, the second biggest market for palladium in 2010, could also significantly affect the supply-demand balance if economic growth in that country were to slow. If no shipments of Russian state stocks of palladium take place in 2011, the palladium market will be in substantial deficit. With these tight supply-demand fundamantals, investors continue to see palladium as relatively undervalued. Continuing speculative investment interest could move the price substantially, and Johnson Matthey forecasts that the price of palladium will average $710 per ounce in the next six months, trading as high as $850 in the period, with the price unlikely to fall below $550. 

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