WPIC: Platinum deficit to exceed 1 million ounces

The World Platinum Investment Council released its quarterly report Tuesday that forecasts the platinum market deficit to exceed 1 million ounces.

Trevor Raymond, CEO of the World Platinum Investment Council, wrote, “(This year) will be the second consecutive year where the platinum market will experience a significant deficit, driven by robust demand and ongoing supply vulnerabilities. However, even with deficits of this magnitude, the platinum price appears unresponsive. For a long time, price setting has been influenced more by sentiment than by supply/demand fundamentals.”

Investment demand reaches highs

Investment demand for platinum grew this quarter to its highest level since the third quarter of 2020, driven by a substantial inflow of 440,000 ounces into ETFs, the report states.

“This strong ETF performance, along with large bar demand in China more than offset a sharp 63% decline in bar and coin investment, which fell to 17,000 ounces due to net disinvestment in Japan and reduced buying in North America,” the report reads.

Factories, jewelry and automobiles

As gold rallied, it is hard not to imagine plenty of money that had been in platinum made it’s way over to the yellow metal, however, platinum is starting to see a rally in market share thanks to an increase in jewelry demand.

Jewelry demand is expected to grow 7% this year.

“This quarter, global platinum jewelry demand surpassed 500,000 ounces for the first time since Q4 2021, marking a 5% year-on-year increase, aided by the widening price gap between platinum and gold,” the report reads.

Industrial demand grew 1% year-over-year in large part due to glass demand growing 48% over 2023 due to Chinese LCD capacity expansions that had been delayed, the report states.

Automotive demand, led by platinum’s leading use as a material in catalytic converters, is also expected to increase by a modest 1% in 2024.

“Arguably, one of the key factors driving sentiment has been expectations of a continued and inevitable decline in automotive demand for platinum in the wake of Dieselgate, in combination with expectations of a rapid electrification of the global drivetrain. As things stand, while Dieselgate has led to a dramatic decline in diesel passenger vehicle production, growing substitution of platinum into gasoline catalytic converters, coupled with much slower than anticipated electrification, means that automotive demand for platinum is now well above pre-COVID levels,” Raymond said.

Supply is expected to fall further

Supply grew by 4% in the second quarter of 2024, thanks in large part to a 7% increase in production from South Africa, which offset declines in other regions.

“However, for full-year 2024, cost-driven restructuring in South Africa is expected to result in a 2% year-on-year reduction in the country’s mined supply,” the report states.