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1、Top picks,Buy,Hold,Buy,Buy,Hold,Sell,Hold,Deutsche BankMarkets Research,EuropeUnited KingdomMetals&Mining,IndustryPGM Market update,Date16 January 2013Industry UpdateGrant Sporre,Factoring in the Amplats closuresRising PGM prices underpinnedAmplats mine closures will be positive for all three PGMs.D
2、espite the impactbeing more pronounced for platinum-an average cut of c.6.5%of demandover the decade,versus a 3%impact on palladium-we retain our medium-term preference for palladium,given the better demand drivers.Over the nearterm(6-9 months),we prefer platinum,however,with the likelihood ofrenewe
3、d labour disruptions and a potential 2H13 restocking leading to a morefavourable risk-reward balance.2013 is likely to remain a tough year forplatinum equities,with cash flows under pressure on a number of fronts.Ourpreference thus remains for the metals over the equities for 2013.Price spikes in pl
4、atinum now much more conceivableThe headline closure of 400koz in nameplate refined platinum capacity(inreality,closer to 300-350koz of real capacity),is 4.5%of our estimated demandin 2013F.However,the flattish production profile until the end of the decadetranslates into an average cut of c.6.5%of
5、demand over the medium term,which is enough to push the platinum market into a sustained industrialdeficit from 2014 onwards.Whilst there are a number of balancing forces,Research Analyst(+44)20 754-Rob CliffordResearch Analyst(+44)20 754-Aquarius Platinum Limited(AQP.L),GBP72.00Companies FeaturedAm
6、plats(AMSJ.J),ZAR487.00Anglo American(AAL.L),GBP1,961.00Aquarius Platinum Limited(AQP.L),GBP72.00Impala Platinum(IMPJ.J),ZAR172.50Lonmin Plc(LMI.L),GBP346.00Northam(NHMJ.J),ZAR36.65,within the supply-demand dynamics which will compensate to close thesedeficits lower Chinese jewellery demand,higher r
7、ecycling volumes andincreased substitution,to name three we think our rising price profile is nowunderpinned.Furthermore,we now think that the potential for platinum pricespikes has increased,leading to excess free cash flow periods for theproducers,before labour,inflation,poor management decisions
8、andgovernment demands erode the free cash flow margins of the companies.Positive for palladium on two frontsThe impact on palladium is less significant than on platinum,with an average3%impact on demand,but the market is already forecast to be in a significantdeficit.The Amplats curtailments only ex
9、acerbate these deficits.However,incontrast to platinum,palladium is still likely to benefit from the substitution indiesel autocatalysts,given the favourable price ratio,(currently 2.37x).It is onlywhen the ratio stays significantly above 2x that we think it is likely thesubstitution pendulum swings
10、 back in favour of platinum in dieselautocatalysts.A rhodium market in deficit,but still well away from the“pinch”pointThe impact on the rhodium market is likely to be similar to that on the platinummarket,with c.6.5%of demand being removed over the course of the decade.However,given high inventorie
11、s,we think the pinch point is further out,andis only likely beyond the middle of the decade.Our medium-term preferencesremain unchanged,with palladium preferred over platinum,and rhodium last.2013 is likely to remain a tough year for platinum equities,with cash flowsunder pressure from labour demand
12、s,and rising social and restructuring costs.Our preference thus remains for the metals over the equities for 2013.Whilewe retain our fundamental Hold rating,we acknowledge Amplats may bearmore of the pain in the near term versus the peer group._Deutsche Bank AG/LondonDeutsche Bank does and seeks to
13、do business with companies covered in its research reports.Thus,investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors shouldconsider this report as only a single factor in making their investment decision.DISCLOSURES AND ANA
14、LYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,16 January 2013Metals&MiningPGM Market updateRising PGM pricesunderpinnedPrice spikes in platinum,now much more conceivableAmplats has announced the outcome of its long-awaited strategic review,with aheadline cut to platinum production
15、 over the medium and long term of 400koz,or 4.5%of our projected demand in 2013F.These production curtailments were based onnameplate capacity of 2.5Moz,which in deep underground vein mining can besomething of a nebulous concept,as shafts rarely perform at nameplate capacity.However,at a steady stat
16、e production of between 2.1-2.3Moz,this is lower than ourprior forecast production profile,as shown in the chart below:Figure 1:Amplats production profile(refined platinum ounces)post the review3,200,3,0002,8002,6002,4002,2002,000,koz,2012,2013F,2014F,2015F,2016F,2017F,2018F,2019F,2020F,Prior,Post,S
17、ource:Anglo Platinum,Deutsche BankThe core of the Amplats restructuring plan is to consolidate the Rustenburg operations,by placing four shafts at the Khuseleka and Khomanani mines on long-term care andmaintenance.The Rustenburg region would then consist of three mines,Thembelani,Siphumelele and Bat
18、hopele,consisting of five shafts with a steady state platinumproduction of 320-350koz.The second component of the restructuring will be to closethe North declines of the Union mine and combine the North and South mines into oneoperation.Amplats is looking to dispose of this mine once the transition
19、has takenplace.We have trimmed our production expectations for Amplats by c.310koz in 2013F,which compares to the guidance by the company of c.340koz of closures(250koz fromthe Khuseleka/Khomanani mines,60koz from Union and 30koz from other mines).Thebigger impact on the market versus our expectatio
20、ns is over the longer term,where wehave a more modest growth profile,with production reaching a peak of 2.46Moz,downfrom 3.1Moz previously.We note,however,that Amplats demand growth forecast is for a c.2.5%CAGR,versusour assumption of a c.3.4%CAGR from 2012F to 2020F.The company did,however,comment
21、that they would retain enough flexibility to meet potential demand increases,Page 2,Deutsche Bank AG/London,koz,16 January 2013Metals&MiningPGM Market updateand in so doing prevent price spikes.We remain sceptical that Amplats will be able torespond sufficiently to surges in demand,and see price spi
22、kes as far more likely,givenour forecasts of market deficits developing from 2014F onwards.As with any dynamicsystem,we believe there will be some inherent counterbalancing on the demand side ofthe equation.Firstly,substitution in autocats between platinum and palladium is likelyto continue,as well
23、as redoubled thrift efforts from the autocat manufacturers.Secondly,recycling efficiencies are likely to improve significantly.We have adjustedboth these components of our model to accommodate the likely responses.Despitethese tempering influences,we continue to forecast net deficits in the platinum
24、 market,averaging c.340koz until the end of the decade.Stripping out the impact of investmentdemand,2013F remains in an industrial surplus of c.180koz,but from 2014F onwardswe see an industrial deficit of c.50koz increasing to 450koz by the end of the decade.Figure 2:A building“industrial”deficit de
25、veloping from 2014F onwards,8006004002000-200-400-600,Deficit,Surplus,2007,2009,2011,2013F,2015F,2017F,2019F,Market balance,Market balance excl.investment demand,Source:Johnson Matthey,Deutsche BankThe platinum price has rallied by 9%since the beginning of 2013,and in our view hasstarted to price in
26、 this curtailment of ounces from the market.Now that Amplats planhas been announced,the risk-reward balance has shifted somewhat,with the risksskewed a lot less to the upside than previously.The positive curtailment risk that wepreviously outlined is likely to be replaced by industrial action,as uni
27、ons and employeestry to“negotiate”better severance terms.The magnitude is unlikely to be as severe asin 2012 in our view,as the average Amplats employee has already had to forego nineweeks worth of wages.We outline our risk matrix in the chart below,indicating our perception of how thepreviously ide
28、ntified events have moved.,Deutsche Bank AG/London,Page 3,High,Impactonourbasecase,Low,1,2,3,6,16 January 2013Metals&MiningPGM Market updateFigure 3:Platinum supply-demand risk matrix,High Risk,Upside RisksPotential,but limited industrial actionfrom Amplats employees in order tonegotiate better seve
29、rance terms.,5,3,1,4,Better than expected European vehicleproduction,combined with a higher thanexpected impact from Euro VI.,5,6,3,5,A rebound in Investment demand tomatch 2009/10 levels,Downside Risks,4,1,2,Higher than expected de-stocking in theChinese Jewellery market.,Stronger than expected aut
30、ocatrecycling in response to strong stainlesssteel and PGM prices.,Low Risk,Weaker than expected Global IP leavingIndustrial demand flat Y/Y,Low,Probability,High,Source:Deutsche BankFigure 4:Platinum supply-demand balance post the Amplats review,Platinum,2010,2011,2012F,2013F,2014F,2015F,2016F,2017F
31、,2018F,2019F,2020F,South African supplyNorth AmericaRussian productionZimbabweOtherAutocat recyclingTotal supplySupply growthTotal demandDemand growthAutocatalystChemicalElectricalGlassInvestmentJewelleryMedical&BiomedicalPetroleumOtherMarket balanceAnnual average priceMarket balance excl.,KozKozKoz
32、KozKozKozKoz%Koz%KozKozKozKozKozKozKozKozKozKozUS$/oz,4,6352008252801101,0857,1354.17,16015.23,0754402203856551,685230170300-251610630,4,8553508353401001,2257,7058.07,2751.63,1954702205554601,6702302102654291719889,4,1143458103781051,0806,832-11.37,171-1.43,1764501902254301,940240200320-339155891,4,
33、0193307944001301,3627,0363.07,2581.23,2264552233754001,744251220365-2221669178,4,2243287804101351,5117,3895.07,7006.13,6724722293502601,830261215410-3111800-51,4,4603157804101351,6477,7484.97,9913.83,8304902363551801,948272220460-2431850-63,4,5583157804101401,7817,9843.08,3264.23,9775082463551902,03
34、3284225510-3431900-153,4,6682857804081451,9198,2052.88,5953.24,0815262563552002,096295226560-3902000-190,4,8312907804081502,0788,5374.08,8593.14,2715442663552102,125306222560-3232000-113,4,8452707804081552,2508,7082.09,1202.94,4725632753552202,134318223560-4122000-192,4,8612707804081602,4368,9152.49
35、,3612.64,6525832843552302,143330224560-4462000-216,investment demandSource:Johnson Matthey,Deutsche Bank,Page 4,Deutsche Bank AG/London,16 January 2013Metals&MiningPGM Market updatePositive for palladium on two frontsAlthough South African palladium production is much less of the overall supply vers
36、usplatinum(we estimate c.28%in 2012F),the magnitude of Amplats proposedproduction curtailments is not insignificant.We estimate the cuts at 195koz in 2013F,rising to c.360koz by the end of the decade.This is c.57%of the magnitude of theplatinum production cuts that we have assumed,with the proportio
37、n rising towards theend of the decade,as the South African industry starts to mine ever more increasingamounts of palladium-rich UG2 ore.We outline our forecasts prior to the review andpost the review.Figure 5:Amplats production profile(refined palladium ounces)post the review1,900,1,8001,7001,6001,
38、5001,4001,3001,2001,1001,000,koz,2012F,2013F,2014F,2015F,2016F,2017F,2018F,2019F,2020F,Prior,Post,Source:Anglo Platinum,Deutsche BankAlthough the curtailments relative to the market size are more modest versus platinum at c.3%,we already forecast significant deficits in the markets.The Amplatscurtai
39、lments only exacerbate these deficits.As with our platinum supply-demandmodel,we have adjusted our autocat recycling estimates upwards,given the likelyresponse in any positive price movements.However,in contrast to platinum,palladiumis still likely to benefit from the substitution in diesel autocata
40、lysts,given the favourableprice ratio,(currently 2.37x).It is only when the ratio stays significantly above 2x thatwe think it likely that the substitution pendulum swings back in favour of platinum indiesel autocatalysts.Taking into account the balancing impact of less mined supplyfrom Amplats vers
41、us higher recycling from autocats,we have increased our deficits byan average of 180koz over the period 2013F to 2020F.We have not increased ourassumption of more rapid substitution from platinum to palladium because thetechnical limitations from Euro VI remain unclear.We assume a 40%palladium conte
42、ntin diesel autocats by the end of the decade.Anecdotally,some market commentatorshave talked about the potential to reach 50%.,Deutsche Bank AG/London,Page 5,2011,16 January 2013Metals&MiningPGM Market updateFigure 6:Changes to the palladium market deficit forecasts post the Amplats review,1,500,ko
43、z,1,0005000-500-1,000-1,500-2,000-2,500-3,0002012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F,Previous,New,Source:Johnson Matthey,Deutsche BankWe outline our full supply-demand forecasts in the table below:Figure 7:Palladium supply-demand balance post the Amplats review,Palladium,2010,2011,2012
44、F,2013F,2014F,2015F,2016F,2017F,2018F,2019F,2020F,South African supplyNorth AmericaZimbabweRussian productionRussian stockdrawRussian salesOther mineSecondary SupplyTotal supplySupply growthTotal demandDemand growthAutocatalystDentalElectronicsChemicalJewelleryInvestmentOtherMarket balanceAnnual ave
45、rage price,kozkozkozkozkozkozkozkoz%koz%kozkozkozkozkozkozkozkozUS$/oz,2,6405902202,7201,0003,7201851,3158,6707.59,19524.55,5805959703704951,09590-525527,2,5609002652,7057753,4801551,6559,0154.07,760-15.66,030550900445295-5651051,255734,2,2209082532,6003002,9001601,5648,004-11.29,02816.36,5385406905
46、30255345130-1,024655,2,1839302652,6502002,8501701,7978,1942.49,3093.16,810527685570195380142-1,115713,2,2699832832,6501002,7501801,9098,3742.29,265-0.57,392515681592136-205155-891800,2,4369562652,65002,6501802,0208,5071.610,1439.57,83850267161578270167-1,636900,2,5139392652,65002,6501802,1418,6872.1
47、10,4252.88,12549169363922275180-1,7381,000,2,5719322652,65002,6501802,2738,8712.110,9224.88,628479715660-32280192-2,0511,100,2,7289262652,65002,6501802,4179,1663.311,4765.19,183468739682-86285205-2,3111,000,2,7509192652,65002,6501802,5769,3401.911,8593.39,564457763705-139291218-2,5191,000,2,77091326
48、52,65002,6501802,7509,5282.012,2673.49,967447789728-190296231-2,7381,000,Source:Johnson Matthey,Deutsche Bank,Page 6,Deutsche Bank AG/London,16 January 2013Metals&MiningPGM Market updateRhodium from persistent surpluses to persistent deficitsSouth Africa is an important producer of rhodium,hence the
49、 impact of Amplatscurtailments will be quite pronounced on the rhodium market.The impact will be lesspronounced in the near term,but given the flattish production outlook over the decade,the impact is likely to be seen toward the middle of the decade.The impact over thenext two years is c.5%of deman
50、d rising to 7%of demand by the end of the decade.We outline our rhodium production forecasts for Amplats,pre and post the review:Figure 8:Amplats production profile(refined rhodium ounces)post the review400,380360340320300280260240220200,koz,2012F,2013F,2014F,2015F,2016F,2017F,2018F,2019F,2020F,Prio
