The great platinum deficit: Council forecasts record demand in 2023

The World Platinum Investment Council (WPIC) forecasts a record 1-million-oz. platinum deficit for 2023, both in absolute ounces and as a percentage of annual demand, amid a surge in automotive and industrial demand and stagnant supply.

In its Platinum Quarterly report released this week, the WPIC highlights a booming demand for the metal, slated to rocket by 27%, hitting 8.23 million ounces. This overshadows a barely changing supply forecast, stagnating at 7.22 million oz., just 31,000 oz. above last year’s figures.

“These statistics spotlight a market under intense pressure, with potential ramifications for investors and industries dependent on this precious metal,” WPIC research director Ed Sterck tells The Northern Miner in an interview (see attached video below).

The recovering automotive sector drives this demand upswing, with Sterck’s data projecting a 13% (or 381,000 oz.) increase in 2023. Ramped-up vehicle production rates underpin this surge, with forecasts indicating a 6% and 7% growth for light-duty and heavy-duty vehicle production, respectively.

Sterck highlighted the ongoing platinum for palladium substitution in gasoline vehicles, an adjustment dictated mainly by the existing price differential between the two materials. On the industrial front, significant capacity additions in the chemical and glass sectors are influencing the demand surge.

The Chinese government has been implementing stricter emission standards from July 1, further bolstering platinum demand as industries integrate more platinum group metal (PGM) coated particulate filter systems. This trend is set to elevate the global platinum automotive demand to an anticipated 3.28 million ounces.

Simultaneously, the industrial sector is smashing records, with predictions setting the demand at 2.67 million oz., a notable 14% year-on-year increase. This rise mainly stems from substantial capacity expansions in the glass and chemical sectors, seeing growth rates of 50% (251,000 oz.) and 12% (82,000 oz.), respectively. In contrast, the electrical and petroleum segments anticipate a dip in demand, slated to fall by 8% (9,000 oz.) and 11% (22,000 oz.).

Investment circles also embrace the platinum trend, with predictions setting the net investment demand at 386,000 oz. for 2023. Platinum ETF holdings experienced a significant surge, growing by 155,000 oz. in the June quarter, marking the most substantial quarterly increase since the third quarter of 2020.

Stagnant supply

However, the supply side fails to mirror this burgeoning demand, notes Sterck.

Refined mine production of platinum has plummeted by 4% or 65,000 oz. over last year, settling at 1.46 million oz. in Q2. South Africa, which contributes 75% of global supply, saw a 9% dip in output year-on-year, a decrease linked to ongoing maintenance activities and relentless power disruptions due to the state-owned power utility’s ongoing load curtailments.

Sterck says recycling avenues, too, are on a downturn, reporting a 12% reduction in global recycling in the second quarter.

According to Sterck, these trends underscore the dwindling availability of above-ground stocks to cushion this growing deficit, hinting at a precarious situation where, by the end of 2023, the stocks might cover only five months of annual demand. “A significant portion of these reserves, held in China, are not readily exportable to meet global demands, potentially heightening concerns over metal availability,” Sterck says.

As the market tightens, the intertwined narratives of soaring demand and constricted supply are positioned to offer both short and long-term value incentives for investors. Moreover, platinum’s pivotal role in facilitating a green hydrogen economy, albeit nascent in 2023, is set to burgeon substantially in the medium term, carving a promising pathway for investors seeking a stake in global decarbonization efforts.

The WPIC is funded by South African platinum miners Anglo American Platinum, Northam Platinum, Sedibelo Platinum Mines, Implats, Royal Bafokeng Platinum and Tharisa.