The global platinum market deficit would narrow for a second successive year but safety stoppages and interruptions stemming from wage negotiations would see South African output of the metal drop in 2016.
The World Platinum Investment Council (WPIC), which was co-founded by South Africa’s largest platinum producers including Anglo American Platinum and Impala Platinum, forecast a deficit of 135,000 ounces based on data compiled by SFA (Oxford), an independent market consultancy.
Including supplies from recycling, which is expected to rebound 14% compared to the 15% retraction in 2015, overall global supply of platinum is expected to increase 3%. This is owing to an increase in automotive demand, especially in light vehicles where the loadings of platinum in autocatalysts increase.
Chinese jewellery demand is also expected to improve this year, the WPIC said. “Demand from all sectors remains robust, supported by growth in European diesel platinum demand and resilient jewellery demand in Asia,” said Paul Wilson, CEO of the WPIC.
“It is encouraging to see that personal disposable income – which is linked to China jewellery consumption – is growing at a rate almost double that of the overall economy,” he added.
The deficit in 2015 was estimated to total 380,000 oz which is 47.5% lower than the 725,000 oz deficit recorded in 2014. Automative demand was 5% higher apparently shaking off the impact of the Volkswagen diesel investigation and despite a slide in investment in platinum-backed exchange traded products, investment overall was higher thanks to interest in platinum bars and coins.
The stand out features of the 2015 platinum market, however, was the 24% increase in refined production – led by a 41% increase in South African production as companies recovered from the debilitating effects of strike action in 2014, and a 15% fall in recycling.
In the case of the lower recycling statistics, the WPIC said that low prices reduced the flow of scrap catalysts from collectors. Depressed steel prices also reduced the scrapping of vehicles, it added.
The elephant in the room, however, is above ground stocks. The availability of excess surface metal is thought to be one of the single largest factors affecting the pricing of platinum group metals, platinum especially.
The WPIC said that in 2015 above ground stock levels ended at 2,32 million ounces, a decline of 14% year-on-year from 2,69 million oz in 2014.
After falling to just below $820/oz in mid-January, the platinum price recovered to $960/oz in early February, its highest level since November on its way down to a low of more than five years of $823/oz on January 18.