The global platinum market recorded a deficit in the second quarter because of robust demand from the investment, automotive and jewellery sectors,plus tight supply, the World Platinum Investment Council (WPIC) said yesterday.
WPIC's Platinum Quarterly report noted a deficit of 464 koz in April-June. WPIC forecasts a 1,028 koz deficit in 2024, widening by 40pc from 2023's deficit.
Platinum jewellery demand is forecast to rise by 7pc to 1,994 koz this year, one of the largest growth drivers.
Automotive demand
Despite a reduced global vehicle manufacturing forecast — to 91.1mn from 91.9mn units — automotive platinum demand is expected to rise by 1pc to 3,237 koz.
Original equipment manufacturers are focused on greater flexibility, continuing production of internal combustion engines (ICEs) and expanding hybrid model production for longer than previously expected after a boom in battery electric vehicle (BEV) sales.
"We've seen a plateauing of battery electric vehicles because consumers are reluctant to adopt full battery electrification," WPIC research director Edward Sterck told Argus. Hybrid vehicles contain platinum group metals (PGMs), but BEVs do not, so the slower than expected expansion of BEVs benefits the platinum market.
In North America, a forecast 26pc rise in hybrid vehicle production in 2024 will support a 6pc increase in North American platinum demand, despite a 4pc decline in ICE vehicle production.
"Automakers still have to meet fleet CO2 targets, and the only way to do that is to prioritise hybrid vehicles," Sterck said.
Investment demand
Holdings in platinum exchange-traded funds increased by 444,000 oz in the second quarter — the highest quarterly inflow since July-September 2020. Inflows were supported by confidence in fundamentals and the metal's underperformance relative to gold.
Purchases of large bullion bars above 500g in China were included in the Platinum Quarterly report for the first time.
WPIC forecasts a 40pc increase in platinum bar investment and a 20pc increase in small bar and coin investment from China, which will offset weak bar and coin demand from the US and Japan.
The growth in investment demand from China is significant, Sterck said: "China is a relatively new market. Demand for platinum investment was effectively zero in 2018."
Platinum supply remains limited
WPIC sees mined platinum supply falling by 2pc to 5,508 koz in 2024, despite a 5pc year on year increase in the second quarter that was driven by South Africa.
Positive market dynamics for platinum have been offset by depressed rhodium and palladium prices that have weighed on profits for South African PGM producers, which have implemented restructuring efforts.
WPIC said South African supply is expected to fall by 2pc to 3,883 koz this year, and Russian supply is expected to fall by 4pc to 646 koz.
Russia continues to be a significant platinum producer, despite sanctions on exports of western mining equipment.
The west has refrained from imposing sanctions on Russian platinum as such a move would make it impossible to meet automotive targets. "There isn't enough alternative supply from the rest of the world to do without Russian material," Sterck said.
The open question for the industry in the long-term is whether low PGM prices can support mine expansions and new mines to enable supply to meet future platinum demand.
"If we put ourselves in the shoes of the mining companies, overall they have a pretty constructive outlook for platinum," Sterck said. "The challenge for producers is that platinum is not produced in isolation — they have to be positive about palladium and rhodium to make investments."
Recycling
Global platinum recycling fell by 2pc year on year in January-June, but WPIC sees full year recycling rising by 2pc to 1,581 koz.
The 2024 rise is attributed to a stabilisation of the spent autocatalyst market after two years of sharp declines. New vehicle inventories are up, and vehicle prices are down, allowing consumers to buy new vehicles and sending more end-of-life vehicles to recycling. Lower PGM prices have also reduced hoarding. Jewellery scrap generation is expected to rise by 4pc in 2024.
