The World Platinum Investment Council (WPIC) said yesterday that it had revised the platinum deficit forecast for the full-year 2023 upwards to more than 1 million ounces, the largest deficit on record, due to strong automotive and industrial demand growth and flat supply.
This was in terms of both absolute ounces and as a percentage of annual demand.
Total supply is expected to remain flat, aligned with the weak 2022 level of 7 224 ounces, down 31 ounces, while demand was expected to increase significantly by 27% to 8 230 ounces.
The Council said the core drivers of platinum’s expected 27% demand growth in 2023 – including strong growth in automotive and industrial demand – were clear to see in the second quarter and built upon foundations laid in the previous two quarters.
Platinum automotive demand rose 19% year-on-year to 840 000 ounces in the second quarter of 2023, as the semiconductor shortage continued to ease, leading to a healthy uplift in vehicle production.
Industrial platinum demand totalled 697 000 ounces in the second quarter of 2023, a 12% increase year-on-year and its highest level since the third quarter of 2021.
“In particular, the chemical industry saw an 87% year-on-year increase this quarter thanks to higher demand for platinum-bearing catalysts from the paraxylene industry, which offset contractions in other areas of industrial demand,” the Council said.
WPIC CEO Trevor Raymond said these favourable conditions were expected to continue in 2023.
“Looking beyond today’s Platinum Quarterly, our research shows that automotive and industrial demand growth underpin total demand growth in 2024 and beyond.
“This offers both short and long-term value incentives for investors, as well as protection from downside risks presented by inflationary headwinds,” Raymond said.
Meanwhile, continuing electricity shortages in major producer South Africa had exacerbated the deficit and maintained downside risk to mined supply.
“In the second quarter of 2023, this combination of demand growth and constrained supply was met by strong ETF inflows, all of which have contributed to a widening gap between the supply of, and demand for, platinum.
“As the deficit grows, it is important to highlight the reduced availability of the above-ground stocks to meet this deficit and to consider the consequences of that.”
Raymond said by the end of 2023, above-ground stocks would represent only five months of annual demand, with most of these stocks held in China and not readily able to be exported to meet global shortfalls, increasing concerns over metal availability.
“This, combined with sustained demand growth and mine supply remaining at risk further strengthens the investment case for platinum,” he said.
According to Raymond, similarly, the link between platinum and the hydrogen economy is increasingly well-known. Green hydrogen produced by platinum-containing electrolysers has a significant role to play in the energy transition.
“While hydrogen-related platinum demand is relatively small in 2023 – of more relevance in a tight market – it is expected to grow substantially in the medium term and could become a proxy for investors looking for exposure to global decarbonisation,” he said.
The Council said for the third consecutive quarter, global platinum demand rose, growing by 31% to 519 000 ounces year-on-year in the second quarter of 2023.
“Meanwhile, refined platinum production fell 4% year-on-year as did autocatalyst recycling by 13% and jewellery recycling by 9%. This led to a market deficit of 348 000 ounces for the second quarter of 2023, marking platinum’s first two consecutive quarters of deficit since the second half of 2020,” it said.
BUSINESS REPORT