World platinum supply will plateau next year, predicts the WPIC
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JOHANNESBURG - THE WORLD Platinum Investment Council (WPIC) yesterday said that it expected the market to remain in deficit for the third consecutive year, following the record deficit recorded in 2020.
The WPIC’s Platinum Quarterly report for the fourth quarter said in 2021 the balance of supply and demand was expected to produce a modest -60 000 ounces deficit as a result of a 17 percent increase in total supply and a 3 percent increase in total demand.
The report said total platinum supply was now forecast to rise 17 percent above the 2020 level to 7.93 million ounces, with refined production rising by 21 percent and recycling supply by 6 percent.
South Africa accounted for the majority of the forecast refined production recovery due to mines returning to full operation after 2020’s Covid-19 driven closures, and the December 2020 recommissioning of the Anglo American Platinum’s Anglo Converter Plant Phase A unit.
“However, risks to South African supply do remain in the form of potential electricity supply disruption as power supplier Eskom undertakes major maintenance programmes through the year,” the report said.
Investment demand was forecast at 756 000 ounces, lower than the record in 2020, mainly as no further growth in futures exchange stocks were expected. However, automotive demand was expected to rebound by 25 percent above the 2020 level.
“Key to this growth are the higher catalyst loading implications of the full implementation of light-duty vehicle Euro 6d and China 6b emissions regulations, and China VI for heavy-duty vehicles,” said the report.
2020 saw a record annual deficit in 2020 highlighting platinum’s attraction as a hard asset during periods of heightened uncertainty because of its deep discount to gold and palladium coupled with its strong growth potential both in the short and long term, the report said.
The 2020 platinum market had been in a -932 000 ounces deficit, the largest annual deficit on record albeit below the -1.2 million ounces deficit forecast in November 2020, said the report. For the third consecutive quarter, platinum posted a -170 000 ounces deficit in the fourth quarter of 2020, as strong demand in automotive, industrial and jewellery sectors and sustained strong investment demand for platinum outstripped constrained supply.
WPIC chief executive Paul Wilson said the combination of the substantive demand growth, combined with the rally in recent months could drive increased investment demand for investors with both short- and longterm investment horizons.
“We continue to see an increase in the number of investors, who had not previously considered platinum, attracted by the strategic underpins to demand for this unique metal. When these investors take a closer look, they see that platinum’s deep discount to gold and palladium and compelling demand growth potential greatly enhance the likelihood of investment demand growth,” Wilson said.
Wilson said the positive momentum in economic recovery of the latter part of 2020 was exhibited in the fact that activity had restarted, and platinum demand has rebounded in the automotive, industrial, and jewellery sectors.