Platinum to run narrow supply deficit in 2021 but demand momentum favours metal: WPIC

THE platinum market will run a small supply deficit this year of about 60,000 ounces as supply rebounds following an interruption-hit 2020, said the World Platinum Investment Council (WPIC).

Providing forward-looking comments in its fourth quarter report, the WPIC said supply this year would increase 17% to 7.93 million oz. Set against this demand would increase 3% to 7.99 million oz as Covid-19 vaccine programmes helped world economies recover.

“We are basically saying the market is in broad balance,” said Trevor Raymond, head of research and investor development at the WPIC.

He added, however, that the prospects for platinum were vastly improved as government policy towards hydrogen technology would result in its wide adoption in the future. “The requirement for platinum in fuel cells has come far more certain,” he said.

Platinum demand last year fell 7% to 7.74 million oz but supply was hit even harder, declining 17% – or some 1.4 million oz – to 6.8 million oz. This was a result of Covid-19 lockdowns that shut down South African supply for about 45 days.

In addition, Anglo American Platinum suffered the closure of its refining operations which it said recently would result in inventories that would take about two years to clear.

As a result of these forces, the platinum market ran a 932,000 oz supply deficit, the largest on record, according to WPIC data. Above ground stocks of platinum are now about 800,000 oz less at some 2.6 million oz than in 2018.

From a price perspective, there had been a 34% improvement in the platinum price last year as evidence has started to grow that platinum is being increasingly sought as a replacement metal for palladium in autocatalysts. However, at about $1,157/oz, platinum was still at a major discount to palladium which was trading at $2,297/oz.

Raymond said this boded well for the continued uptake of platinum industrially. “A platform for substitution has to be in place for the next seven years,” he said.

There has been a recent response by the South African PGM sector with the announcement of projects worth a potential 1.2 million oz in new platinum group metals (PGM) production over the next six to 10 years. Raymond said that “if anything this has been overdue” when asked if South African miners were over-enthusiastic in their response to high prices.

“Supply is likely to be fairly flat over the next three to four years,” he said. “And this doesn’t account for (platinum demand from) substitution.”

The WPIC said in its report that automotive platinum demand in 2021 was forecast to increase 25% accelerated by Chinese heavy-duty vehicles.

Paul Wilson, CEO of the WPIC, said in a prepared statement that “… platinum’s rapidly accelerating substitution for palladium in autocatalysts will require over a million more ounces of platinum per annum within four years”.

Commenting on platinum as a metal of interest in the green hydrogen economy, he said: “As hydrogen availability rises and its production cost falls, due to accelerated global investment in decarbonisation, fuel cell vehicles are likely to require over a million more ounces of platinum per annum within 10 years”.