2020 platinum supply to exceed over demand by 1.5%
World Platinum Investment Council (WPIC) published twenty-second Platinum Quarterly data set, which is examines activity in the fourth quarter and for full year 2019 and includes a new forecast for 2020. Independent analysis is provided by our research partners: SFA (Oxford) in respect of 2019 and prior years; Metals Focus in respect of 2020.
Overview of supply and demand:
The Foreword to the report provides an overview of supply and demand developments in the platinum market, as well as our view on issues and trends relevant to considering exposure to platinum as an investment asset. There is also a short update on our product partnerships.
Set against an earlier prediction of a sizeable surplus for 2020, today’s forecast is that in 2020 platinum supply will exceed demand only by 1.5% or 119 koz, with total supply of 8,117 koz and total demand of 7,998 koz.
1: Demand in 2020 reflects automotive demand growth, from more platinum per heavy-duty vehicle in China and per diesel hybrid passenger vehicle in Europe, and particularly strong demand growth in glass manufacture.
2: As coronavirus fears continue to rattle markets worldwide, there is the potential for the impact of the virus to reduce platinum demand if it is not contained within months; particularly platinum jewellery demand in China where containing the outbreak has already reduced store traffic.
Platinum supply and demand were similar in 2019, resulting in a balanced platinum market - a surplus of 65 koz - in contrast to the surplus of 790 koz in 2018, 1: Total supply was up 1% from 8,060 koz to 8,125 koz with mining supply flat and recycling supply up 5%. 2: The massive increase in the value of palladium and rhodium in recovered catalysts had some impact on spent auto catalyst volumes.
3: Total demand in 2019 increased by 11% compared to 2018, from 7,270 to 8,060 koz, with the significant increase in investment demand more than offsetting lower automotive, jewellery and industrial demand. 4: Meanwhile, global jewellery demand contracted by 7% to 2,095 koz in 2019, with the majority of the contraction in China (-14% to 945 koz in Q4’19).
Investment demand 2020:
In 2019, exceptional investment demand of 1,185 koz (985 koz ETF and 215 koz bar and coin) was 1,170 koz higher than in 2018 and more than offset demand decreases in other segments. Going into 2020, the forecast predicts total investment demand of 633 koz, with ETF holdings rising by 330 koz, just under a third of their growth in 2019, and bar and coin demand expected to reach 303 koz.
2020 the turning point:
While demand for platinum in the automotive sector fell 7% in 2019 (down 8% in Q4’19), projections for 2020 include increased demand from more platinum in diesel hybrid vehicles in Europe, and heavy-duty vehicles in China. The forecast shows automotive demand up modestly at 3,011 koz in 2020.
The ongoing unavailability of palladium has become more pronounced into 2020, increasing further the likelihood of platinum demand growth as it substitutes for palladium in auto catalysts. The range of forecasts for the palladium deficit in 2020, from participants in the palladium market, now varies between 900 koz and 1,900 koz.
There is wider awareness that palladium supply is unable to respond to very high prices and that many Chinese automakers buy metal for near-term vehicle production in the spot market. This is reflected in the palladium market price and its sustained backwardation.
To reduce the very significant fines faced by automakers if their fleet CO² level exceeds new limits being introduced in Europe in 2020, many automakers have increased the number of diesel hybrid models on sale with very low NO× and CO² emissions. Higher platinum loadings per vehicle support increased platinum demand in 2020.
Industrial demand:
Industrial demand for platinum fell by 1% (-20 koz) to 1,890 koz in 2019 as the rise in platinum use in the chemical industry, primarily in China, of 6% (to 605 koz) was unable to offset declines in other segments.
Industrial demand for platinum in 2020 is forecast at 2,284 koz. Key to this is the expected robust performance from the glass industry. LCD glass furnace construction will be fuelled by healthy increases in Chinese capacity, as well as the replacement of some Japanese furnaces with significantly larger ones. Demand for glass fibre manufacture is expected to be steady, supported by continued growth in global capacity.
We hope you find this quarter’s report supportive to your efforts to assess and better understand the platinum market, and ultimately make better informed investment decisions. As always, we welcome your thoughts regarding additional insights and research that the WPIC can instigate in the coming months.
