Platinum supply unlikely to recover to pre-pandemic levels in 2021 says WPIC

PLATINUM was in a fourth successive supply deficit in the first quarter of 2021 as automotive, investment and jewellery demand outstripped supply which also grew, but was “constrained”, said to the World Platinum Investment Council (WPIC).

Commenting in its first quarter report, the WPIC also said that platinum supply was unlikely to recover from its pre-Covid-19 levels this year.

Total supply is forecast to rise 16% to 7.88 million ounces in 2021, but this was still “some way off” pre-pandemic supply of 8.22 million oz in 2019.

With demand for platinum expected to increase by 5% – an increase of 378,000 oz to some 8,04 million oz – 2021 will generate a deficit for the third year running of 158,000 oz, the council said in its report.

In another observation in the report, the WPIC said that despite the world economic recovery this year, assisted by the roll-out of Covid-19 vaccinations, there may be “setbacks” in the management of the pandemic.

“We may see further tragic twists and turns in how the global pandemic is resolved, adding caution to any optimism,” said the council’s CEO, Paul Wilson.

Wilson also said the platinum’s linkage to climate action and the metal’s role in the developing hydrogen economy remain long-term supportive factors for the metal whilst the “recent increase in commodities” would also drive demand, he said.

“When these investors take a closer look, they see that platinum’s constrained supply, deep discount to gold and palladium and compelling demand growth potential greatly enhance the likelihood of investment demand growth,” he said.
Key aspects of the first quarter report were:
  • the supply deficit in the first quarter totalled a slim 19,000 oz
  • higher vehicle production and tighter emissions regulations increased platinum automotive demand by 8% or 50,000 oz in the first quarter
  • overall investment demand increased 96% or 69,000 oz year-on-year to 140,000 oz

Commenting on the outlook for the remainder of the year per demand segment, the WPIC said that there would be an increase in automotive platinum demand of 22% – 557,000 oz –  to 2,93 million oz, exceeding pre-pandemic levels. Platinum investment demand was unlikely to conduct the heroics of last year and was likely to hit at 726,000 oz in demand, the previous five year average.

In this investment demand, however, exchange traded fund holdings are expected to rise by 250,000 oz “… as enthusiasm for platinum’s demand fundamentals will continue to prompt fresh investment inflows,” the WPIC said.