Platinum seems near price surge: Sprott

Platinum may be on the cusp of a sustained price rise amid forecasts for reduced inventories and a third straight year of supply scarcity, Sprott Asset Management says in a new report.

After deficits of 896,000 oz. in 2023 and 992,000 oz. last year, the global platinum market is expected to record a shortfall of 966,000 oz. this year, the World Platinum Investment Council said this month. That’s up from the council’s March forecast of an 848,000-oz. deficit.

And while platinum prices have gained about 17% this year, persistent production challenges, limited recycling and the absence of major new mines severely limit supply growth – which could result in further price increases. In fact, if the current trends hold, above-ground platinum inventories – which are near historic lows – could be depleted within three years, Sprott says.

“With inventories dwindling and demand outpacing constrained supply, platinum may be nearing a tipping point that could trigger a significant repricing,” Shree Kargutkar, a portfolio manager at Sprott, said in the report dated Thursday.

Output slump

Mine supply is projected to drop 6% this year, according to council forecasts. Output slumped 13% in the first quarter to its lowest level since 2020 – mostly due to power outages and disruptions in South Africa, the world’s biggest platinum producer. The country accounts for about 80% of global mined platinum output.

Total platinum supply will probably fall below 7 million oz. this year, council data show. With the exception of the pandemic years, this means that supply in 2025 will be at its lowest level since 2013, the council says.

Global platinum supply has declined by an average of 1.2% a year since 2015 – a trend that Sprott calls a “structural erosion.”

Tight supply is one of the reasons platinum futures have gained about 8% in the past month. They hit $1,090 an oz. Friday, the highest since May 2024, Trading Economics data show.

New mines?

Bringing new platinum mines online is a capital-intensive and time-consuming process that can often require more than a decade, Sprott says.

“With no major new mines on the horizon and recycling growth stunted, the platinum market faces a supply ceiling that amplifies the impact of growing demand,” Kargutkar says.

“Unlike temporary imbalances, this structural deficit is driven by fundamental supply and demand dynamics that show no immediate signs of resolution, making it a potentially powerful catalyst for price appreciation.”

While the council expects platinum demand to fall 4% this year amid heightened trade tensions, the figure marks an improvement from the group’s March forecast, which called for a 5% decline.

Automobiles

Carmaking is the main driver of platinum demand. The metal is a key element in making catalytic converters, which help cut emissions from automotive exhaust. But rising adoption of electric vehicles, which don’t need catalytic converters, is eating into the traditional demand.

Above-ground stocks could shrink to three months of demand by the end of 2025, WPIC forecasts show.

“Over time, this is an unsustainable situation as commodity markets typically self-solve for a deficit with price stimulating a supply response or disincentivising demand,” the WPIC said in its first-quarter report.

Platinum is already rarer than gold, occurring at very low concentrations in the earth’s crust.For every 17-18 oz. of gold that is mined, a single ounce of platinum is extracted, Sprott says.