Platinum deficit to reach 1.2M oz. in 2020: report

A geo technician checks core sampling at Platinum Group Metals'  Waterberg project on the North Limb of South Africa's prolific Bushveld Complex.A geotechnician checks core sampling at Platinum Group Metals' Waterberg project on the North Limb of South Africa's prolific Bushveld Complex. Credit: Platinum Group Metals.

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. 

Recovering supply

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.

Strong demand

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, part of Glacier Resource Innovation Group.


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