The platinum market is expected to post its biggest deficit since records began in the 1970s, as supply falters in South Africa and China’s industrial expansion moves ahead.
Global platinum Demand is expected to rise 28% this year to 8.2 million ounces after investors pile in, adding to strong industrial consumption and increased use of the metal in auto catalytic converters in the first quarter. according to the World Platinum Investment Council, an industry body.
At the same time, falling output, exacerbated by electricity supply stuttering in South Africa’s top producer, prompted WPIC to revise its deficit forecast upwards by 77% from three months ago, to 983,000oz this year. .
“That would be a record deficit in ounces from records going back to the 1970s,” said Edward Sterck, director of research at WPIC. He added that the last time 12% of demand was not met by new supplies and recycling was in 1999.
Platinum prices have risen nearly a fifth from their February lows of $1,080 an ounce and are above their five-year average of $940 an ounce.
The gains have encouraged fund managers to turn to exchange-traded funds that track the market and are backed by a physical holding of the metal.
The deficit marks a sharp reversal from the excessive supply glut of the previous two years, when auto production was hit semiconductor deficiencies.
Platinum is used in catalytic converters that reduce harmful emissions from vehicles, as well as in fiberglass for wind turbines, electronics and petrochemical plants.
In the short term, manufacturers say demand is supported by tightening emissions legislation, but in the long term, uncertainty looms as to whether demand emerging from the hydrogen economy will outpace the phase-out of combustion engine vehicles .
The prediction comes as the industry gathers in London for the annual Platinum Week conference. Persistent energy supply shortages in South Africa, which account for 70% of global supply, are likely to be the focus of attention.
Banking turmoil in the US has prompted investors to seek out precious metals and a growing awareness of supply shortfalls for South African fund managers has prompted a shift from equities to holding platinum-backed exchange-traded funds, industry sources said .
WPIC believes industrial demand in 2023 will be strongest ever for platinum, despite fears of a global economic slowdown, due to expansion of chemical and glass plants in China, as well as the continued substitution of platinum by palladium in automobile exhausts.
Record palladium prices have made automotive catalysts, especially those in hybrid vehicles like the Toyota Prius, a target for thieves in recent years and prompted automakers to switch to platinum.
Other market forecasters disagree with WPIC’s hike given weaker demand for consumer electronics, where glass is used in LCD touchscreens and other industries.
Previous years of bountiful supply mean enough inventories have been built up at 3.8 million ounces to meet demand, but as they shrink, prices will likely rise and become more volatile.
However, there has been a seismic shift where about 85% of the material is in China, where Sterck says it is “captive,” skyrocketing from less than 5% four years ago.
Of the six platinum group metals, which also include palladium, rhodium and iridium, several analysts say platinum’s prospects are brightest due to its use as a catalyst for hydrogen fuel cells and electrolysers.
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