JOHANNESBURG (miningweekly.com) – The platinum market is expected to remain in fundamental balance, albeit with a small 15 000 oz deficit for this year, the World Platinum Investment Council’s (WPIC’s) latest ‘Platinum Quarterly’ report shows.

The report, published on Wednesday, incorporates analysis of platinum supply and demand for the full year and the second quarter of 2017.

“[The] report once again highlights the complexity of the platinum market and the many different underlying dynamics at work, all of which add up to a market largely in balance. Supply clearly remains constrained, with the longer-term effects of reduced capital expenditure and above-inflation increases in operating costs beginning to bite in some areas,” WPIC CEO Paul Wilson highlighted in a press statement.

The report highlights that overall supply is expected to contract further this year, as a result of the closure of uneconomic mining at current market prices.

This tangible action was illustrated by the Bokoni platinum mine being placed on care and maintenance in July, as well as the similar actions for several gold mines in the region, according to the WPIC.

“Mining supply is expected to be down 1% and total platinum supply is expected to decrease by 2% year-on-year to 7.80-million ounces,” WPIC research director Trevor Raymond told Mining Weekly Online on Wednesday.

Mining supply in the second quarter increased by 30 000 oz quarter-on-quarter, but decreased by 155 000 oz year-on-year. Overall, the market had a modest surplus of 75 000 oz in the second quarter.

Secondary supply for the full year, meanwhile, is forecast to slip by 3% compared with 2016, with a reduction in jewellery recycling outweighing increased autocatalyst recycling. 

While conditions remain lacklustre in terms of demand, there is continued resilience of platinum demand from the automotive sector, as well as from the platinum jewellery sector, which is counter to many negative commentaries on these sectors, Raymond pointed out.

He noted that automotive demand is forecast to decrease by 75 000 oz this year on a 3.4-million-ounce-a-year demand in 2016.

The full-year forecast for demand in the automotive segment is 3.36-million ounces, down 2% on the 3.44-million ounces in 2016 and close to overall automotive demand in 2015 and 2014. This is despite a further reduction in diesel market share in Western Europe. 

The report shows that, while diesel share in Europe continues to erode in the smaller and mid-sized vehicle segments, it remains robust and as high as about 80% in the larger, luxury and multipurpose vehicle segments.

The application of mild hybrid technology, which can be seen in the Audi SQ7 TDi,  can also reassert diesel’s efficiency advantages over its gasoline counterparts, particularly with respect to carbon dioxide emissions.

Autocatalyst demand for platinum remains robust, defying the expectations of some, with overall demand levels for this year expected to be roughly the same as in 2014.

Raymond also pointed to the potential of the application of higher platinum loading for each car to achieve very low nitrogen oxide (NOx) emissions, which may result in stronger demand from the automotive segment.

Wilson added that it was “pleasing” to see that the debate around emissions is becoming grounded.

He believed this would show investors the role automotive use of platinum will play in future demand growth. “We look forward to shining a light on the extent to which automakers are increasing platinum loadings in their new models and fleets in coming quarters,” Wilson noted. 

Global platinum jewellery consumption, meanwhile, is estimated to fall 1% to 2.59-million ounces this year. However, this masks significant changes in demand by country, Raymond said, explaining that, despite weakness from China, growth in India and the US remains strong.

The data reaffirms the strong prospects for the Indian jewellery market, reflecting published data from Platinum Guild International (PGI), which recently reported that sales had accelerated by 48% year-on-year in the second quarter, Raymond told Mining Weekly Online on Wednesday.

He highlighted that jewellery demand was forecast down only 15 000 oz this year on a  2.6-million ounce-a-year demand. 

Overall, industrial demand data was down during the second quarter, down 65 000 oz to 400 000 oz, with the fall prompted by the timing of plant consolidation in glass manufacture and petroleum refining, which creates quarterly demand volatility, Raymond noted.

The report, however, shows an increase in platinum demand for use in medical devices. 

Industrial demand is expected to fall by 9%, or about 165 000 oz this year, mainly as a result of fewer glass facilities being built, compared with 2016, and lower net demand from the petroleum industry, as some refineries are closed down. The metal from these facilities is expected to be recycled during this year.

Global investment demand, meanwhile, amounted to 90 000 oz for the second quarter, with bars and coins and exchange-traded funds (ETFs) seeing gains, while exchange stocks remain unchanged. This marks the sixth consecutive quarter of positive investment demand.

The data further indicates that overall investment growth for this year is likely to be greater than expected, should the rate of growth observed in the first half of the year continue over the next two quarters, Raymond added. 

“[Platinum] had a strong first half and at the end of July, investment demand had already reached  220 000 oz . . . However, WPIC has left the forecast of 250 0000 oz for the year unchanged,” Raymond explained.

Investment demand was buoyed in the second quarter by increased ETF demand from South Africa, Switzerland and Japan, he pointed out.

The report also highlights the direct impact the WPIC’s market development efforts are having, with an increasing number of investors using BullionVault’s service to add to their vaulted platinum bar holdings. About 5 000 oz of platinum demand came from BullionVault.