Revised platinum deficit forecast for 2023, up 77% to 983 koz, as demand grows 28% and supply decreases 1% year-on-year
Stronger-than-expected positive investment demand in quarter one sees full-year forecast raised to 433 koz
Industrial demand on track to be the strongest on record, increasing 17% driven by glass capacity expansions in China
Strong platinum automotive demand growth continues in 2023, up 12% on higher loadings and increased substitution
Jump in investment demand to over 400 koz
Q1'23 saw a surge in investor interest, driven by heightened global uncertainty, platinum's strong demand growth and concerns about risks to mine supply. Bar and coin investment jumped by 71% year-on-year in Q1'23 to 102 koz, propelled by a marked recovery in Japan. This trend is set to continue for the full year, with an increase of 79% forecast. Meanwhile, net platinum ETF holdings grew by 43 koz in Q1'23, reversing the previous six quarters' net disinvestment. Again, this trend is expected to continue in 2023. The result will mean net investment demand of 433 koz in 2023 – a swing of 1,073 koz on 2022.
Industrial demand in 2023 will be the strongest on record
Industrial platinum demand grew 8% in Q1'23, driven by growth in chemical demand of 108% due to paraxylene capacity additions in China. On a full-year basis, LCD glass capacity additions in China are expected to offset closures in Japan and result in glass demand for platinum growing by 76% year-on-year to 730 koz. Overall, this year is forecast to be a record year for industrial demand, growing by 17% year-on-year to 2,628 koz.
Platinum automotive demand up strongly despite weak macro outlook
Automotive demand rose 9% to 806 koz in Q1'23, partly aided by higher vehicle production, but mainly on increased platinum use per vehicle. On a full year basis, global automotive demand is expected to rise by 12% in 2023 to 3,255 koz driven by a number of factors. Firstly, heavy-duty vehicle (HDV) production is forecast to grow by 6% in 2023, with output in China jumping by as much as 26%. Secondly, tighter emissions legislation, particularly in China, will result in higher loadings, especially for HDVs and non-road vehicles. Lastly, growing platinum for palladium substitution in gasoline after-treatment systems will further boost platinum consumption. Significantly, this has meant a further upward revision to the substitution estimate for 2023 to 615 koz.
Total supply continues to struggle in 2023
Refined mine production declined 8% in Q1'23 year-on-year and fell 11% against Q4'22, as gains from Russia failed to offset reduced output from South Africa. While mined platinum supply is forecast to fall by a modest 1% to 5,511 koz in 2023, as reductions in South Africa are partially offset by gains in Zimbabwe and North America, significant uncertainties still exist for South African platinum supply due to the impact of the country's ongoing electricity shortages.
Global recycling of platinum remained sluggish in the first quarter of 2023, falling 12% year-on-year to 413 koz, due to reduced volumes of end-of-life vehicles. Meanwhile, the regulatory environment in North America aimed at curbing autocatalyst theft also hindered recycling volumes. With both issues likely to prevail throughout 2023, full-year platinum recycling supply is forecast to fall by 1% to 1,682 koz.
The outlook for platinum group metals (PGMs) is one of constrained supply and very strong demand growth. “You’ve got the entire PGMs suite that is short and that certainly will translate into tight markets,” World Platinum Investment Council (WPIC) Director of Research Trevor Raymond told Mining Weekly in a Zoom interview on Monday. (Also watch attached Creamer Media video.)
“The most material driver is the substitution of palladium by platinum. I think we’re starting to see widespread recognition that it’s happening but it’s still proprietary and confidential. We’re starting to see estimates of anything between one and one-and-a-half-million ounces of substitution, people are saying, by 2025. It’s our view that it’s happening a lot quicker and will be a lot sooner. But that’s quite a material growth. You're looking at another one-million ounces within four years in the platinum market. That’s pretty strong demand,” he said.
“Also, the other thing that’s driving demand is investment.
Daily platinum futures chart with the recent strong advance.
Platinum has been the best performing precious metal so far this year. The metal has been underperforming for years on oversupply and suffering from Volkswagen's emission scandal and the subsequent phasing out of Diesel worldwide —as platinum is used extensively in the catalytic converters on vehicles powered by diesel engines.
A new element for platinum now in the market is U.S.President Joe Biden's "new green wave," considered bullish for platinum, as it is used for hydrogen fuel cells in the drive of heavy- and light-duty vehicles.
The market never waits until the last investor has seen all the details. The time to jump in is now!
A new study by Auctus Metals gives a lot of details regarding PGM's (Platinum Group Metals).
Attachment 2 shows the estimated platinum end-use in 2020with the automotive sector consuming 30% of supply.
Attachment 3 indicates platinum estimated to be in deficitin 2020 due to COVID-19 and the Anglo American Platinum converter plant outage during the first two quarters of 2020 and additional closure announced in early November 2020 following a series of water leaks.
Attachment 4 displays a 5-year chart on platinum futureswith the breakout on the upside in December 2020 at US$ 1'050 per ounce. Platinum is now in a long-term bull market.
A new element for platinum now in the market is U.S.President Joe Biden's "new green wave" is considered bullish for platinum as it is used for hydrogen fuel cells in the drive of heavy- and light-duty vehicles. The market never waits until the last investor has seen all the details.
Now Implats joins high-flying PGMs-linked venture capital fund
High-flying venture capital fund AP Ventures supports technologies making use of PGMs to help the world combat climate change.
Existing investors in the London-headquartered AP Ventures, which this year established a South African presence, include South Africa's Public Investment Corporation, Anglo American Platinum, the Toyota-linked Mirai Creation Fund, Mitsubishi Corporation, Plastic Omnium and Sumitomo.
Now Implats joins high-flying PGMs-linked venture capital fund
JOHANNESBURG (miningweekly.com) – Platinum group metals (PGMs) mining and marketing company Impala Platinum (Implats) announced on Monday that it would be joining a high-flying venture capital fund that supports technologies making use of PGMs, which are helping the world to combat climate change.
Existing investors in the London-headquartered AP Ventures, which this year established a South African presence, include South Africa's Public Investment Corporation, Anglo American Platinum, the Toyota-linked Mirai Creation Fund, Mitsubishi Corporation, Plastic Omnium and the Sumitomo Corporation.
AP Ventures' investment strategy is focused on companies developing technologies which are capable of sustainably solving global challenges such as renewable energy integration and resource scarcity. A key area of focus is the decarbonisation of transport, mining and heavy industry, by the only fund of its kind offering investors access to these innovative, fast-growing companies built on the PGM properties.
LONDON (Reuters) - A rally in rhodium, a precious metal used to reduce vehicle emissions, has exploded into high gear, with surging demand and an uncertain supply outlook pushing prices up 40% in just three weeks to near record highs.
Rhodium RHOD-LON is used to neutralise nitrous oxides in car exhausts, and increasingly stringent emissions regulations, particularly in China, are forcing auto makers to use more of the metal.
Demand is expected to outstrip supply this year and supplies are being disrupted by power outages at South African mines which produce more than 80% of mined rhodium.
Prices have rocketed to $9,975 an ounce from $6,040 at the start of January - ten times their level through the mid-2010s and within a whisker of an all-time high of $10,050 in 2008.
"It's being driven by insatiable demand from Asia," said Scotiabank analyst Nicky Shiels.
"There is also a supply side trigger with power cuts in South Africa. That injects a certain amount of fear into the market and in a small, opaque market that can have a huge impact," she said.
(Graphic: Rhodium, palladium and platinum prices - here)
"near-term pull-back likely before further gains in late 2017"
Below is a comment on Palladium from Metals Focus, June 13, 2017:
Attachment 1 shows the long term chart of Palladium and attachment 4 the 1-year chart. Attachment 5 is the Point&Figure chart which shows how volatile this precious metal is.
Palladium has posted a remarkable rally over the last three weeks,hitting a 16-year high of $928 on 9th June, which representsa 23% increase from its recent trough in April. Moreover, withplatinum's lacklustre price performance over the same period,the spread between the two fell to as low as just above $30 lastFriday. Even though the rally soon lost momentum, palladium hasso far managed to consolidate in the high $800s, making it by far the strongest performer in the precious metals complex.
Palladium's robust gains year-to-date have been assisted by a severesqueeze in physical liquidity in Western terminal markets. In spiteof sizeable above-ground stocks (estimated at 15.3 Moz at end-2016), signs of market tightness have emerged since late 2016;the market has seen moves into backwardation and securingmetal in the spot market has been challenging. More recently,this backwardation in the Nymex futures has deepened, whileinventories at the exchange now amount to a mere 42koz, theirlowest level since 2003.
We believe that the biggest reason behind such tightness hasbeen strong speculative demand for physical metal from Asianentities. Feedback from our field trips indicates that these heavypurchases have been fuelled by bullish price expectations aswell as confidence that palladium fabrication demand willcontinue to strengthen in the coming years. This in turnhas resulted in a major shift of stocks out of Western terminal markets.
Meanwhile, as palladium prices broke out above technical resistancelevels, speculative interest from short-term investors seems to havepicked up notably. As of 6th June, net managed money positions inNymex futures stood at 1.18Moz, almost double their end-2016 figureand only a fraction below the peak recorded in August 2014 (whenpalladium last surpassed $900).
Looking ahead, as the palladium market is forecast to remain ina sizeable deficit in the foreseeable future, further price strengthseems still justified. However, given the scale of the recent rally, wewould caution that the white metal is vulnerable to heavy investorprofit taking. After all, despite an apparent lack of short-term physicalliquidity, palladium bullion stockpiles remain ample at present. Moreimportantly, growth in global vehicle production is likely to slow downthis year. Although the notable weakness in key car markets such asthe US and China in recent months has so far little dampened investorconfidence in palladium, this poses a downside risk to prices.
Ongoing macroeconomic uncertainties also cannot be ignored,which could weigh on investor sentiment towards industrial metals ingeneral. Already in the US, expectations about economic growth havebeen scaled back, amid growing political turmoil and disappointingmacroeconomic data. Related to this, we retain the view that acorrection in US equities is looking increasingly likely.
Against this backdrop, we believe that $928 may well represent thepeak for 2017. In the near term, the recent pull-back in prices maywell continue, before renewed strength emerges later in the year.
Moreover, given that the palladium market is far smaller and henceless liquid, this renewed strength is likely to be accompanied bycontinued high price volatility".
ResourceInvestor.com
About 2000 years ago, Aristotle explained why gold remained the ideal choice of money throughout major nations and civilizations. In words that are just as relevant today, he said "Gold is durable, not like wheat, divisible, not like diamonds, convenient, not like lead, constant, not like real estate, and best of all, as jewelry, it has intrinsic value".
Among the most rare, valuable and sought after metals on Earth, platinum shares these same characteristics with gold. Platinum Guild International names platinum as the "most precious" of the precious metals based on its relative scarcity as well as for the following reasons:
The annual supply of platinum is only about 6.4 million oz. - which is equivalent to only 7.4% of the annual gold production and 0.87% of silver's annual mine production.
Platinum is exceedingly difficult to mine and extract. For example, rock face temperatures at Northam Platinum's Zondereinde mine in South Africa get as high as 162 degrees Fahrenheit and its shafts extend as far as 1.4 miles below the surface. Overall, the platinum recovery process is very complex and lengthy, in some cases taking as long as six months.
There are over 5 billion oz. of above ground gold ($8 trillion), whereas only an estimated 200 million oz. ($0.3 trillion) of platinum has ever mined....just 3.75% that of gold $ wise.
In addition to its high-conductivity, resistance to corrosion and inertness, platinum is an extraordinarily dense metal. 10% more dense than gold and 20 times the density of water, one cubic foot of platinum weighs more than 1,330 pounds (523 kilograms). As Vronsky notes, "that means a six-inch cube of the white metal weighs about as much as an average man!" This density, along with its other unique chemical properties, makes platinum an invaluable component in a myriad of industrial applications.
Platinum has many more utilities than gold. Unlike gold, more than 50% of the annual production of platinum is consumed (read destroyed) by industrial uses (40% alone go to catalytic converters).
Unlike gold, there are no large stockpiles of platinum (less than 4 million oz.). Therefore, any disruption in supply from the two major sources (South Africa at 80%, Russia at 10%) could propel platinum on a similar trajectory palladium experienced in 2001, when it moved sharply from $350/oz. to $1,100/oz.
Very Limited Supply
While virtually all other metals can be found in deposit the world over, platinum is anomalous in that important deposits are essentially found to occur in just two areas of the world (apart from a small handful of smaller deposits in North America and Zimbabwe), South Africa and Russia. Platinum does get produced as a by-product in some regions, but only in insignificant volumes.
Roughly 80% of the total world's annual mine production comes from South Africa and, with 88% of the world's reserves, it is far and away the most important national player in the platinum market. Another 10% of platinum supply comes from Russia, with bit players responsible for the remainder. As South African politicians have tabled mining nationalization policies in the last two years, any further escalating political instability and/or labor turmoil in South Africa could have a dramatic impact upon platinum prices – and the same holds true for Russia, albeit it to a lesser extent .
Other Regional Platinum Producers
There are but a few publicly-traded mining companies that produce platinum, and, in most of these cases, only as a by-product. An example is the giant nickel producer Vale-Inco in Canada. Total platinum production in North America is estimated to be less than 400,000 oz. per year (5% of world production) according to the British Geological Survey. Global Platinum Consumption Platinum consumption is typically divided into three categories: 50% industrial uses (auto catalysts account for majority), 40% jewelry manufacturing and 10% for investment purposes. With a rapidly emerging middle class, and dramatic economic growth, China is expected to increase both automobile and luxury jewelry purchases as citizens continue to accumulate wealth. China has eclipsed the United States as the largest consumers of cars and is projected by the IMF to be the world's largest economy by 2016. In 2011, about 3.82 million ounces of platinum will go into auto catalysts, 17% more than this year and the most since 2007. Investment Prospects for the Rich Man's Gold
Since 1970, platinum has on average commanded a 30% premium over gold. As the following chart from www.infomine.com demonstrates, from 2000 to 2008, platinum spent much time trading over 1.8 times gold price.
Historically, the price of platinum runs in tandem with the precious metals group (gold, silver, platinum and palladium). However, as platinum is less liquid and has a smaller investor set, it is much more volatile both on the upside and downside compared to gold.
Platinum price appreciation has outpaced gold since 2001, right up until the US financial crisis in 2008. While gold has recovered from losses and is trading within 15% of its all-time high, platinum price is trading at two-year low and has yet to recover.
While there is mounting concern about global economic growth, automakers are still expected to sell a record 79.5 million cars and light commercial vehicles in 2012, according to LMC Automotive Ltd., a research company based in Oxford, England.
Demand for platinum is also coming from investors, as holdings in exchange-traded products collectively surpassed 1.5 million oz. in 2011 since the first platinum ETF was launched in 2007. Therefore, going forward, investment demand could be a significant surprise factor in driving platinum prices higher.
In 2012, we can expect to see:
Persistent high gold price
Global recovery of auto sector
Platinum investment demand through ETF and physical possession
Ongoing limitations and potential disruptions to supply
All in all, the current situation bodes well for platinum. Look for it to trade substantially higher and back at a premium over gold, once the bull market in precious metals begins its cycle anew. With the current crisis in the euro currency and run-away US deficits, platinum might just regain its reign as the rich man's gold in 2012.
John Lee, CFA jlee@prophecyplat.com John Lee is a private investor in metals and mining stocks. He has authored numerous articles and been a featured speaker at international conferences on precious metals and global economies. Currently Mr. Lee is the Chairman of Prophecy Platinum (TSX-V: NKL), an explorer with a significant platinum resource in Canada's Yukon Territory. Click here to download full article in Word format. Disclaimer: The views expressed in this article are those of the author and may not reflect those of Prophecy Platinum Corp. Neither Prophecy Platinum Corp. nor the author can guarantee accuracy of all information provided. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Prophecy Platinum Corp. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
Platinum is exceedingly difficult to mine and extract. For example, rock face temperatures at Northam Platinum's Zondereinde mine in South Africa get as high as 162 degrees Fahrenheit and its shafts extend as far as 1.4 miles below the surface. Overall, the platinum recovery process is very complex and lengthy, in some cases taking as long as six months.
Platinum consumption is typically divided into three categories: 50% industrial uses (auto catalysts account for majority), 40% jewelry manufacturing and 10% for investment purposes. With a rapidly emerging middle class, and dramatic economic growth, China is expected to increase both automobile and luxury jewelry purchases as citizens continue to accumulate wealth. China has eclipsed the United States as the largest consumers of cars and is projected by the IMF to be the world's largest economy by 2016. In 2011, about 3.82 million ounces of platinum will go into auto catalysts, 17% more than this year and the most since 2007. 
