Supply is continuing to lag demand in the platinum market, leading to a structural deficit, and this presents a compelling investment case, industry organisation World Platinum Investment Council (WPIC) research director Edward Sterck says.

The platinum market is expected to record its third successive shortfall this year, at 966 000 oz.

This follows deficits of 992 000 oz and 896 000 oz in 2024 and 2023, respectively.

Moreover, looking at the WPIC two- to five-year forecast, deficits are forecast to occur every year until 2029, he points out.

On the supply side, mine supply is projected to be at multi-year lows. Miners spent 2024 restructuring assets and reducing capital expenditure in the wake of the low platinum group metals basket price, Sterck says.

Recycling volumes have struggled to return to historical levels.

Meanwhile, demand is relatively robust and, while it is projected to be down 4% year-on-year this year, this is largely owing to cyclicality within the glass manufacturing industry – significantly fewer new glass production facilities are due to be commissioned this year, Sterck outlines.

As a result, glass demand for platinum is projected to be down 58% year-on-year at 289 000 oz, compared with 690 000 oz in 2024.

The WPIC believes both supply and demand to be relatively price inelastic, meaning that quantities of either are unlikely to fluctuate much when the price changes, at least in the near-term, and that this presents an attractive investment opportunity, Sterck informs.

DEMAND DRIVERS

There is potential for demand growth to go above the WPIC’s estimates, driven mostly by upside potential to investment and jewellery demand.

The WPIC expects the global drivetrain to continue to electrify and the gradual decline in platinum demand to continue, albeit at a slower pace than was anticipated in the past.

This means higher-for-longer automotive demand for platinum, despite the uncertain economic outlook, with the benefit of an additional boost from demand for hybrid vehicles, Sterck highlights.

DEFICITS

The structural deficit in the platinum market is embedded and continues to deplete above ground stocks, which are expected to fall to barely three months of demand by the end of this year, an unsustainably low level, Sterck warns.

This is leading to market tightness, which is currently reflected in elevated lease rates, among other indicators, he adds.

“Elevated lease rates have the effect of encouraging the lending of platinum to end-users, which acts as a temporary source of supply until such time as the borrowers need to return metal to close out the loans. It remains to be seen whether sufficient platinum will be available at that time at current prices,” Sterck says.

Platinum’s unique properties and associated uses in a diverse range of end markets help to mitigate the negative impacts of trade barriers and the associated potential negative impact on global GDP growth rates; as a result, the impact of tariffs on the 2025 platinum demand outlook is less than might be expected, Sterck says.

The WPIC has modelled the economic and tariff risks and, while they could erode platinum demand, the scale of the platinum market deficit forecast this year is so significant that it is difficult to envisage a scenario that would materially reduce it, he explains.

IMPACT

“Basic market economic theory suggests that a market in deficit will typically trigger a price reaction that stimulates new supply to the market or prices demand out of the market. The difficulty for platinum is that both supply and demand are highly price inelastic in the short-term, which can lead to sustained periods of market imbalances,” Sterck explains.

He posits that there is growing appreciation of the extent to which platinum’s strong supply/demand fundamentals, resulting in the structural deficit, are underpinning its compelling investment case.

This is further boosted by platinum’s robust and diverse drivers of existing demand, and the emergence of a new demand driver for platinum through its use as a critical mineral in technologies that enable the use of hydrogen in the energy transition, Sterck highlights.

At the same time, platinum’s wide price discount relative to gold and its current undervalue relative to its own historical levels present investors with an interesting opportunity, he adds.