The World Platinum Investment Council (WPIC) has released its latest platinum market report, adjusting its 2024 deficit projection up to 476,000 ounces as weaker supply is outpaced by sustained auto and industrial demand.
“For the second consecutive year, the platinum market will post a meaningful deficit underscored by platinum's sustained demand and supply vulnerability amidst global economic challenges,” said WPIC CEO Trevor Raymond.
“While we currently forecast a deficit of 476 koz, it is worth mentioning that a revision to the bar and coin investment series, based on new field research and information, could mean this deficit is potentially deeper,” he added.
Total platinum supply in the first quarter was the second lowest in the WPIC's time series at at 1,625,000 ounces, with the full-year number also expected to be near a record low. The market deficit for the quarter came in at 369,000 ounces.
Despite efforts to bolster supply, risks remain a prominent theme in 2024. Total mine supply is forecast to decrease by 3 percent year-on-year, driven by lower output from key producing regions such as South Africa and Russia.
More specifically, restructuring and impending closure announcements in the South African region have had a major impact in maintaining operational flexibility, according to Edward Sterck, the WPIC's director of research.
“In the past, if a mining company happened to hit a geological interruption, they might have been able to move the work elsewhere. Going forward, the flexibility to be able to do that is probably reduced,” he told the Investing News Network.
Edward Sterck: Platinum Deficit Revised Up, Watch H2 for Potential Price Move
Watch the full interview with Sterck.
Refined production in South Africa is expected to decline by 2 percent year-on-year due to announced restructuring plans, closures of shafts/sections and slower production ramp ups than previously anticipated.
Similarly, Russian supply is projected to be affected by planned smelter maintenance throughout 2024. In North America, headcount reductions are anticipated to impede the return of production to pre-2020 levels.
Recycling also contributes to platinum supply, and while it showed some improvement in Q1 compared to the fourth quarter of 2023, it remains historically weak. The WPIC reported better jewelry recycling, primarily driven by the liquidation of platinum jewelry stocks, but said weakness persists in automotive recycling and the electronics sector.
Automotive sector leads platinum demand higher
On the demand side, automotive platinum demand is benefiting from ongoing substitution of platinum for palladium, increased production of light- and heavy-duty vehicles and hybridization trends.
Coming in at a seven year high in Q1, automotive demand was 832,000 ounces, which Sterck said was partially the result of consumers' reluctance to switch from internal combustion engine vehicles to electric vehicles (EVs).
He noted that EV market share has stalled out at about 20 to 25 percent in China, while Europe is at about 20 percent. North America is quite a bit lower, at only single digits for EV market share.
"That said, they are prepared to make the switch to partial electrification. So we're seeing the fastest-growing segments now are hybrid vehicles," he said, adding that these vehicles require platinum. "I think the kind of impact here really is that what we're seeing is potentially a higher-for-longer environment for platinum for automotive end uses."
Meanwhile, platinum demand from the jewelry sector is expected to rebound from a low base, with an anticipated increase of 109,000 ounces in 2024. The WPIC anticipates that this growth will be broad-based, with India expected to lead the way in terms of growth, while China is poised for a mild recovery.
Total industrial demand for platinum is forecast at 2,242,000 ounces in 2024, reflecting a 15 percent decline year-on-year. This decline should be understood in the context of record demand levels in 2023.
The industrial demand segment now includes a separate line item for the hydrogen economy, accounting for 75,000 ounces and representing a significant increase of 128 percent year-on-year. This encompasses applications such as electrolysis, stationary power and non-automotive fuel cell mobility.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.