JOHANNESBURG (miningweekly.com) – There was a slight dip in both platinum demand and supply in the first quarter of this year, the World Platinum Investment Council (WPIC) reports.
The organisation on Monday revealed that refined output decreased by 0.7% year-on-year in the first quarter, largely as a result of South African mine supply falling to its lowest level since 2016.
WPIC research director Trevor Raymond told Mining Weekly Online that although South African producers had delivered a good performance in 2017 – which is expected to bleed through to this year – the improved political environment has led to a stronger rand, which, when combined with the high costs and a relatively low platinum price, has resulted in lower margins, likely impacting on supply.
Further, recycling supply for the first quarter had decreased by about 13% quarter-on-quarter, but increased by about 7% year-on-year.
Raymond attributed the quarter-on-quarter decline to relatively weaker scrap steel and palladium prices in the first quarter.
Meanwhile, platinum demand for the quarter slipped 1% year-on-year on the back of lower automotive and investment demand.
Raymond noted that higher demand from significant heavy-duty diesel vehicle sales in the US, as well as retrospective heavy-duty vehicle legislation in China, was not enough to offset the declining demand automotive markets in Western Europe.
However, “the rebound that we expected from jewellery and industrial demand has played itself out in the first quarter, which is encouraging,” Raymond commented.
Jewellery demand increased by 3% year-on-year, largely owing to a 7.9% year-on-year increase in China.
Industrial demand improved by 4% year-on-year as a result of growth in propane dehydrogenation capacity in China and increasing fuel-cell production in Japan.
Raymond speculated that exchange-traded fund demand remained flat because antidiesel sentiment had tinged investor sentiment, but added that coin and bar demand was fairly strong, buoyed by the release of the US Mint’s bullion and proof platinum American Eagle coins.
Raymond stated that the first quarter results supported the WPIC’s view that there will be a reduction in the level of the overall surplus for the full year, while demand will increase marginally.
Global supply is expected to decline by 1% in 2018, despite recycled supply increasing by about 3% year-on-year. Demand for platinum jewellery is predicted to climb by 2%, with industrial demand forecast to increase by 6% year-on-year.
Investment demand is predicted to decline to 250 000 oz, with automotive demand falling by 3% year-on-year.
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Raymond, meanwhile, pointed to the concern in China and the US – large gasoline car markets that use palladium in their autocatalysts – surrounding the availability of palladium.
He suggested that, as a result of the high palladium price and global trade tensions, Chinese and US-based automakers will switch some of their gasoline car emissions control systems from palladium to platinum.
Raymond estimates that if only 20% of gasoline cars in the US and China moved from palladium to platinum, it would increase platinum demand by over 800 000 oz/y.
“About eight-million ounces of palladium is in automotive use each year but only 3.4-million ounces of platinum. With switching, a small amount of substitution is not material to palladium but very meaningful to platinum.”