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Heraeus Precious Appraisal

  • Edition 28 - 19 August 2019

Falling EU manufacturing PMI and truck sales shift platinum demand into low gear

Truck orders in Europe trend with manufacturing activity, which is declining. The Eurozone manufacturing PMI fell to 46.5 in July. In Daimler’s home market of Germany new orders for medium- and heavy-duty vehicles (M&HDVs) fell by 19.4% year-on-year to 6,865 in Q2’19. For Europe as a whole (EU30), new orders were down 13.5% to 18,493. Volvo and Scania are also seeing significant declines in M&HDV new orders in Europe (-9.2% and -9.6% year-on-year respectively in Q2’19). The three companies combined have over 50% of the European truck market.

The decline in the manufacturing PMI suggests that new orders for trucks will continue to fall and so will platinum demand. The expectation was that Western European M&HDV sales would grow slightly this year and in 2020, and platinum demand would therefore also increase slightly. Western European platinum demand for M&HDVs was estimated at 200 koz, or 29% of global M&HDV demand this year. In the last Eurozone recession, M&HDV sales fell by 10.6% in 2012, with platinum demand falling by a similar amount. If the slowdown in the economy turns into a recession then a 10% drop in M&HDV sales in Western Europe would cut platinum demand by 20 koz. This is another area of weak demand in an oversupplied market so the platinum price is likely to decline further.

Growth in the Eurozone is forecast to slow to 1.3% this year (source: IMF). However, the risks are to the downside. World trade volume is no longer expanding and Germany is particularly exposed as an export-oriented economy. German GDP contracted by 0.1% in Q2’19. China-US trade discussions remain unresolved and the US also has forthcoming trade talks with the EU. Uncertainty over how Brexit will be resolved continues to weigh on business in Europe. For now the services side of the economy and consumer spending are maintaining the economic expansion. However, manufacturing is at a recessionary level and it will not take much to tip the whole economy into recession.

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Heraeus Precious Metals - Setting the PGM agenda for the years ahead

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