Platinum deficit to reach 455 000 oz in 2016

JOHANNESBURG (miningweekly.com) – Lower supply of and higher demand for platinum are expected to lead to a 455 000 oz deficit this year, compared with the 135 000 oz deficit previously anticipated.

Total supply was forecast to decrease 1% to 7.8-million ounces this year, from 7.9-million ounces in 2015, owing to lower refined production from South Africa and Russia outweighing increases in other regions and from recycling, the World Platinum Investment Council (WPIC) said on Monday.

The WPIC’s latest Platinum Quarterly report for the first quarter of this year, showed that global demand for platinum would increase “marginally” to 8.25-million ounces this year, from 8.22-million ounces in 2015. 

WPIC research director Trevor Raymond told Mining Weekly Online that mining supply estimates had been revised down by 75 000 oz owing to a temporary shaft closure in South Africa.

He noted that the growth rate of autocatalyst recycling had also been reduced after a slow start to the year and the anticipated level of jewellery recycling had been revised down owing to lower prices discouraging recycling in Japan and subdued jewellery sales in China during the first quarter of the year.

“Forecast demand has been lifted by 90 000 oz owing to greater anticipated investment demand, as Japanese bar buying remains robust, and a modest increase in industrial use, outweighing reductions in the expected growth in automotive and jewellery consumption,” Raymond said.

Automotive demand was forecast to be 3.42-million ounces this year, which was 1% lower than the 3.44-million ounces recorded in 2015.

Raymond pointed out that the weaker platinum demand for passenger cars and heavy-duty vehicles in the US and a small reduction in Western Europe, as a result of diesel share declines, were not fully offset by growing vehicle sales. However, this outweighed increases in automotive platinum demand in other regions.

He commented that jewellery consumption was expected to increase marginally by 1% to 2.89-million ounces this year from 2.88-million ounces in 2015, as an anticipated decline in Chinese jewellery purchases was offset by growing requirements elsewhere, particularly India.

Industrial platinum use is projected to contract by 3% to 1.58-million ounces mainly owing to lower petroleum and glass demand caused by reduced new capacity builds.

However, Raymond highlighted that investment demand was projected to add 350 000 oz to total demand in 2016, which he said would be driven by a continuation of “robust bar buying” in Japan.

Meanwhile, refined supply was forecast to be 5.8-million ounces this year, with total mine supply of 5.9-million ounces as some sales from producer inventory were expected.

Raymond pointed out that South African output was forecast to be 4.2-million ounces, 6% lower than the 4.4-million ounces produced in 2015 owing to the impact of shaft closures.

Further, Russian supply was also expected to be 6% lower this year, at 675 000 oz, with the report stating that some material would “be locked up” in the production pipeline when processing facilities were reconfigured.

Platinum recovered through recycling was estimated to increase by 95 000 oz to 1.8-million ounces, with secondary supply from autocatalysts growing to 1.3-million ounces as volumes were projected to recover with the improvement in metal prices. Jewellery recycling would decline by 20 000 oz to 495 000 oz. 

FIRST QUARTER REVIEW
Platinum supply reduced by 210 000 oz quarter-on-quarter to 1.7-million ounces in the first quarter of this year, with total mine supply having slipped by 230 000 oz to 1.3-million.

Raymond highlighted that recycling volumes grew by 20 000 oz quarter-on-quarter to 395 000 oz.

“While the first quarter saw only a small improvement quarter-on-quarter in recycled metal, the collection rate of scrapped vehicles has picked up as the rise in scrap steel prices that began in March has continued into the second quarter.

“The similar improvement in platinum group metals prices has also encouraged scrapped autocatalysts to be recycled. The ongoing trend is for growing numbers of vehicles to reach the end of their lives each year and this, along with higher metal loadings in the recovered autocatalysts, should drive the increase in recycled metal,” he stated.

Refined production fell by 420 000 oz quarter-on-quarter to 1.1-million ounces in the quarter under review, owing to a decline in South African refined output caused by a temporary refinery closure. Raymond said the effect of this disruption was not entirely offset by sales of 150 000 oz from producer inventory.

Nonetheless, he highlighted that global platinum demand rose 180 000 oz quarter-on-quarter to two-million ounces, despite lower jewellery (-11%) and industrial use (-6%), as automotive demand improved (2%) and investment demand had a positive quarter after experiencing disinvestment in the fourth quarter of 2015.

Global investment in platinum had totalled 155 000 oz in the first quarter, with bar and coin purchases of 140 000 oz and movements in exchange stocks of 40 000 oz outweighing a decline in exchange-traded fund (ETF) holdings of 25 000 oz.

Raymond explained that the final quarter of 2015 had seen significant reductions in ETF holdings and that this selling continued in the first part of 2016. However, as the platinum price recovered over the quarter, sales switched to purchases, particularly in South Africa where an 88 000 oz decline in January and February was partially reversed in March as ETFs gained 31 000 oz.

“US investors reversed sales of 10 000 oz in January with purchases of 31 000 oz over the final two months of the quarter. Overall, the first quarter of the year saw a drop in global ETF holdings of 25 000 oz driven by a decline of 56 000 oz in South African ETF holdings.

“In the first three months of the year, US, European and Japanese investors raised their holdings by 20 000 oz, 7 000 oz and 4 000 oz, respectively. In Europe, UK and Swiss investors added a modest 3 000 oz and 4 000 oz respectively to their ETF holdings,” commented Raymond.

Bar and coin investment in the first quarter of 2016 stood at 140 000 oz. He said that this was again driven by bar purchases in Japan, which were up significantly year-on-year, but were down from the very high levels seen in the second half of 2015.

Raymond said initial indications were that coin buying was not quite as strong in the first quarter of this year as it was in the first quarter of 2015.

However, he noted that the impact of the launch of the new platinum philharmonic coin, by the Austrian Mint, in February was still being evaluated.

“The disruption in refined production along with reasonable overall demand for platinum in the first quarter of 2016 resulted in the global platinum market having a deficit of 275 000 oz,” Raymond added.