CAPE TOWN (miningweekly.com) – Following a few tough years, experts believe the platinum sector’s future looks bright, with a strong case for investing in the precious metal.
World Platinum Investment Council CEO Paul Wilson this week said traditional investors had walked away from platinum as an investment from 2015 to 2017, but added that investors did not understand the market.
“Many commentators have looked at reasons why the price was weak. Platinum has been valued alongside gold merely because it is a precious metal, ignoring the wonderful supply: demand balance it has,” he told delegates at the Investing in African Mining Indaba, in Cape Town.
He said platinum had performed well against other asset classes over a long period.
“It is very much an asset that should be considered by thoughtful investors as a store of value,” he said during a panel discussion on the investment case of and opportunities for platinum.
Wilson said future mining supply was constrained as a result of falling capital expenditure and increases in real costs, which had come down by 60% a year. But he said some concerns had been overstated.
“Platinum use in automobiles is robust, despite claims of collapse. Jewellery platinum supply has taken a bit of a hit, but it’s grown year-on-year. I think that platinum jewellery is far more stable than gold jewellery in the Chinese market, with a strong outlook.”
The panelists said there had been fantastic growth in platinum jewellery demand in India, while the drop in China was owing to the fundamentals in the economy and more competition for disposable income.
“There was a 20% drop in gold jewellery [demand] but only an 8% drop in the demand for platinum jewellery. Gem sets with platinum have grown,” said Wilson.
Anglo American Platinum (Amplats) CEO Chris Griffith said demand for investment in platinum had remained positive for 16 of the past 18 years.
“There has been very strong demand for platinum bars in Japan over the past two years, with 500 000 oz of investment going into this. This forms a very real source of demand for platinum.”
Griffith said the five-month-long strike in the South African platinum mining sector in 2014 had badly hit the market, with one-million ounces not being produced. He said Amplats had shut down 400 000 oz of loss-making production over the past few years.
But despite the difficulties, Griffith expects modest future growth in demand. “Ongoing deficits in this market will continue to persist, but not massive deficits. It’s likely we’ll see a sustained, steady increase in price, which we think is healthy for the industry.”
The expected growth in demand for electric vehicles (EVs) in the future has sparked some hope, with the platinum industry very keen on getting involved in the production of fuel cell components for EVs.