JOHANNESBURG (miningweekly.com) – Robust growth is expected to drive total platinum demand to 8 118 000 oz, leading to a substantial market deficit of 1 028 000 oz in 2024, the World Platinum Investment Council (WPIC) says in its revised full-year 2024 forecast published with its Platinum Quarterly for the second quarter of this year.

Total platinum supply is expected to decline by 1% from the already weak levels of 2023, reaching 7 089 000 oz, while recycled supply will likely see a modest year-on-year increase of 2% to 1 581 000 oz. This gain will be offset by a 2% year-on-year decrease in mined supply, which is projected to drop to 5 508 000 oz.

“We've got really robust demand,” WPIC research director Edward Sterck commented to Mining Weekly in a Zoom interview. (Also watch attached Creamer Media video.)

While a higher-for-longer internal combustion engine automotive thesis is feeding into investment interest in platinum, that must be contrasted with worsening supply limitations from mine supply and recycling perspectives.

“Fundamentally, that hasn't been reflected in prices yet – but that sort of disconnect can only be sustained for so long,” Sterck added.

This year will be the second consecutive year where the platinum market will experience a significant deficit, driven by robust demand and ongoing supply vulnerabilities.

Mining Weekly: For some time now, the platinum mining industry has been reporting good ongoing demand, but at prices too low to ensure good long-term supply. How is it possible that demand is good but prices are bad?

Sterck: It's an excellent question and something we've been doing quite a lot of work on recently. This sits a little bit outside the scope of our regular platinum quarterly, which we're publishing now. Platinum price inputs can be divided into the three main categories of underlying fundamentals, market-related categories, and then sentiment-related categories. Effectively, for platinum, what we've seen is that underlying fundamentals were the main price-setting mechanism up until about 2010, plus or minus a year. Since then, we've seen more market-related and sentiment-related factors being the main price-setting mechanisms. Part of that has been as a result of things that have occurred in terms of platinum demand from a sentiment perspective, such as Dieselgate and then battery electrification of the drive train. Those have factored into market expectation that future demand for platinum, whilst it might be okay right now, it's not going to be sustained. What we're seeing is the opposite. We're seeing a slowdown in battery electrification, higher-for-longer automotive demand, and so, in theory, we should begin to see those underlying fundamentals return to being the most important price-setting mechanism. Now, that's been somewhat masked over the last couple of years by the big increases in the prices of palladium and rhodium. Those have sustained supply, and now that they have come down with a bit of a bump, as of the middle of last year, we think that's another reason to expect the underlying fundamentals to return to being the most important price-setting mechanism for platinum going forward. When does that tipping point come? That's the question that's difficult to answer right now, so these deficits are being satisfied with above-ground stocks, and we expect the depletion of those above-ground stocks to continue to a point where that market tightness comes in, and then that's the point at which those underlying fundamentals become the most important mechanism for establishing platinum value.

INVESTMENT DEMAND

Investment demand for platinum is projected to reach 517 000 oz in 2024, taking in the purchases of bullion bars of 500 g and above in China, made possible by access to more granular market data.

In the three months of April, May and June, these purchases doubled from last year’s second-quarter levels, reaching 41 000 oz, and are expected to achieve 40% year-on-year growth for full-year 2024, reaching 188 000 oz.

Second-quarter investment demand surged to its highest level since the third quarter of 2020, driven by an inflow of 444 000 oz into platinum exchange traded funds (ETFs).

This strong ETF performance, along with large 500-g-and-above platinum bar demand in China, more than offset a sharp 63% decline in bar and coin investment, which fell to 17 000 oz on net disinvestment in Japan and reduced buying in North America.

Second-quarter global platinum jewellery demand surpassed 500 000 oz for the first time since the last quarter of 2021, marking a 5% year-on-year increase, aided by the widening price gap between platinum and gold.

Platinum jewellery fabrication in India surged 15%, fuelled by strong exports to the US, the UK, and UAE. Jewellery fabrication in Europe was up 7% and in China it rose by 5%.

For full-year 2024, historically high gold prices will help platinum jewellery demand grow by a projected 7% year-on-year to 1 994 000 oz, WPIC forecasts.

In India, jewellery fabrication is expected to demonstrate further strong growth with a 28% increase, while Japan's demand is forecast to rise by 8% to 365 000 oz, the highest level since 2019. Offtake in Europe is expected to grow by 4% to reach a record high and 3%-higher demand in North America this year is also projected to reach a record high.

Notably, fabrication in China is set to improve by 3%, reversing a decline in demand that has persisted since 2013.

This year’s industrial demand is forecast to reach a 1%-higher 2 369 000 oz on the elevated levels of 2023.

Glass demand in the second quarter of this year increased by 48% to 216 000 oz, owing to Chinese liquid crystal capacity expansions that were delayed from 2023. As a result, a 47% year-on-year increase in glass demand is expected for full year 2024.

Demand in the medical sector is expected to rise by 4% to 303 000 oz and demand for hydrogen-based applications is projected to rise by 123% to 64 000 oz year-on-year in 2024.

Petroleum demand is expected to soften by 3% to 153 000 oz, while electrical will rise by 1% to 90 000 oz, and other industrial sectors by 2% to 582 000 oz.

Overall, gains will offset a sharp decline in platinum chemical offtake, which dropped 48% in the second quarter to 122 000 oz, mainly the result of a slowdown in China's petrochemical industry. For the full year, chemical demand is expected to decrease by 31%, to 542 000 oz.

Automotive platinum demand in 2024 is forecast to reach a seven-year high, growing by 1% year-on-year to 3 237 000 oz, despite a downward revision in global vehicle production estimates to 91.1-million units. This growth continues to be underpinned by softer consumer demand for battery electric vehicles and the continuation of growth in hybrid vehicle numbers, alongside stricter emissions legislation and an increase in platinum-for-palladium substitution, which is forecast to reach 752 000 oz this year.

For full-year 2024, cost-driven restructuring in South Africa is expected to result in a 2% year-on-year reduction in the country’s mined supply, which is forecast to fall to 3 883 000 oz.

This, coupled with forecast declines in Russian output, is expected to lead to a 2% decrease in total mined platinum supply, falling to 5 508 000 oz, a four-year low.

Meanwhile, global recycling remained supressed in the second quarter, with only a 1% year-on-year increase driven by a slight rise in spent autocatalyst recycling, offsetting declines in jewellery and electronic scrap.

Recycling is expected to reach 1 581 000 oz for the full year, a 2% year-on-year increase, with the spent autocatalyst market expected to show some signs of stabilising after two years of declines, supported by improvements in the factors that previously disrupted the flow of materials from consumers to scrapyards and from scrapyards to refiners.

Above-ground stocks are forecast to decline for the second year in succession, with a 25% decline to 3 006 000 oz, hitting a four-year low and resulting in just over four months’ worth of demand cover.

WPIC's market development activities, including the annual Shanghai Platinum Week, and a growing number of product partners in China have been instrumental in achieving the significant growth in investment demand in that region.

This area of demand, which has been growing for several years, from 31 000 oz in 2019 to 186 000 oz in 2023, is forecast to surge by 34% this year.

The relevance of platinum's growing role in the hydrogen economy is supported by ongoing allocation and deployment of more than $300-billion in tax incentives and subsidies from governments worldwide continue to support platinum demand in the hydrogen sector. This is giving global investors an opportunity to link to global decarbonisation efforts.