Despite strong quarter-on-quarter recovery in supply, the global platinum market is set to experience a second consecutive year of deficit at just over 1.2 million oz. in 2020, according to the World Platinum Investment Council’s (WPIC) latest quarterly report.
A stellar rebound in automotive demand and sustained strong investment demand for precious metals lifted platinum demand well above supply in the third quarter of 2020, leaving the quarter in a deficit of 709,00 ounces.
Both sides of the market showed strong recovery during the quarter, with supply and demand up by 48% and 75%, respectively, over the second quarter.
Compared to the same quarter last year, total platinum supply in the third quarter fell by 5%, which is modest compared to the 36% year-on-year decline in the second quarter. Total mine supply grew to within 4% of the level in the third quarter of 2019 as operations ramped up capacity.
However, the total mine supply forecast for 2020 sees a 21% fall year-on-year, due to Covid-19-related mine shutdowns and the impact of converter plant outages during the year.
The Council forecasts supply to outpace demand in 2021, with a 17% increase in supply compared to a 2% growth in demand, which would close the deficit to 224,000 ounces.
Investment demand increased considerably in the third quarter, up 291% year-on-year, with significant rises in ETF demand and bar and coin sales. Demand is expected to grow by 32% in 2020, as precious metals, including platinum, remain an attractive alternative investment, supported by platinum’s deep discount to gold.
Despite Covid-19 workplace requirements that are impacting capacity, pent-up vehicle demand and incentives in Europe and elsewhere drove growth in global automotive production levels. Consequently, automotive demand for platinum in the third quarter was just 3% below the prior-year quarter.
The early adoption by some cities and provinces of China VI legislation for light duty vehicles and the ramp-up of heavy duty vehicles’ compliance requirements to China VI saw China platinum auto demand growth of 68% year-on-year in the past quarter.
A 24% annual increase in global automotive demand for platinum is forecast in 2021, as light-duty vehicle production is set to increase by 15%, and heavy-duty vehicle production is expected to grow by 5%.
Increased loadings to meet more stringent emissions levels will also benefit platinum demand. Platinum is also used as a substitute for palladium in gasoline autocatalysts and a replacement for palladium in diesel after-treatment systems.
Global platinum jewellery demand in the third quarter bounced back by 27% quarter-on-quarter as pandemic-related restrictions eased, with a 14% increase in China. Looking to 2021, global jewellery demand is forecast to gain 13%, with all regions seeing double-digit growth.
— This article first appeared in MINING.com, part of Glacier Resource Innovation Group.