Platinum demand declines, but still outstrips supply for sixth consecutive year

JOHANNESBURG (miningweekly.com) – This year is expected to be the sixth consecutive year that global platinum consumption has outstripped supply, with a predicted total supply decline of 4% overshadowing the anticipated 6% decrease in demand.

Following a “mixed” 2016, the World Platinum Investment Council’s (WPIC’s) latest 'Platinum Quarterly' report, released on Thursday, raised the forecast platinum market deficit for 2017 to 120 000 oz after the market ended 2016 at a deficit of 270 000 oz – a deeper shortfall than previously estimated.

“The upward revisions of the 2016 deficit and the forecast 2017 deficit, which will be the sixth consecutive annual shortfall, show that the platinum market is tightening amid solid demand and increasingly constrained supply,” WPIC research director Trevor Raymond told Mining Weekly Online in a telephonic interview ahead of the report’s release.

Global platinum supply remained constrained in 2016, while overall demand remained constant, he noted, with the report showing a total platinum supply increase of 1% to 7.96-million ounces in 2016, while global demand decreased marginally to 8.2-million ounces.

In 2017, it is forecast that total platinum supply will decline by 4% to 7.66-million ounces, with both refined production and secondary supply projected to decrease by a respective 2% and 6% to 5.92-million ounces and 1.76-million ounces, and total mining supply set to drop by 3% to 5.9-million ounces.

Platinum supply in South Africa is expected to drop 1% to 4.18-million ounces on the back of the closure of lossmaking operations and depletion at various operations, while production from Zimbabwe is estimated to drop by 7% to 445 000 oz.

“Platinum recovered through recycling is forecast to fall by 6% year-on-year to 1.76-million ounces in 2017, primarily owing to a substantial [20%] drop in jewellery recycling to 500 000 oz, outweighing the anticipated 2% growth to 1.25-million ounces platinum recovered from autocatalysts,” the report showed.

DEMAND
The global platinum market deficit is projected to narrow to 120 000 oz in 2017, as global demand decreases by a larger amount than total supply decreases, with projections of platinum demand of 7.78-million ounces, primarily owing to lower forecast investment demand and lower net requirements for the petroleum sector.

“Lower net requirements in the petroleum sector are the main contributor to the expected reduction in overall industrial use of 9% to 1.6-million ounces, with consumption little changed in all the other industrial sectors,” WPIC noted in its Platinum Quarterly.

Demand in the automotive sector is expected to remain relatively stable with a marginal 15 000 oz drop forecast to 3.39-million ounces, while jewellery demand is predicted to decline 1% to 2.53-million ounces, owing to weaker demand in China, which is anticipated to outweigh growing demand in India, North America and Europe.

For this year, platinum requirements for chemical catalysis are anticipated to remain stable at 590 000 oz, while platinum use in electrical devices is forecast to fall by 6% to 150 000 oz.

Meanwhile, the WPIC highlighted a forecast 50% drop in investment demand to 250 000 oz this year, owing to higher prices reducing Japanese bar purchases and limited projected increases in exchange-traded fund (ETF) holdings.

Platinum ETFs spiked significantly at the end of the year, continuing into the first quarter of the year, boosting investment demand for platinum.

“Should investment demand in 2017 end up matching that of 2016, this would significantly offset the decrease in total demand currently forecast for 2017,” the report showed.