WPIC lowers platinum surplus forecast, notes healthy demand

The World Platinum Investment Council (WPIC) has adjusted its platinum supply forecast for this year downward from a 375 000 oz surplus to a 345 000 oz surplus.

The WPIC stated in its latest Platinum Quarterly report, released on Friday, that refined production should grow by 5% this year, as some mining projects ramp up, but mostly owing to the refining of metal built up in the processing pipeline in 2018.

Recycling is forecast to grow by 3% as an increase in platinum recovered from autocatalysts more than offsets a decrease in jewellery recycling owing to the low platinum price.

The WPIC reports that total supply and mine supply of platinum in the second quarter of the year were 1% lower year-on-year and 2% lower year-on-year, respectively. This was owing to pipeline movements in Russia and South Africa.

The WPIC expects refined output from south Africa, excluding stock releases, to be about 5 000 oz less year-on-year this year, as the ramp-up in new projects is more than offset by the expected reduction in yield in mature, high-cost operations.

Inclusive of one-off stock releases, the country’s refined platinum production is likely to grow by 5% year-on-year.

Meanwhile, the WPIC predicts demand for this year will be 9% higher year-on-year, owing to an increase in investment demand, which should offset lower automotive and jewellery demand.

The substantial increase in investment demand by institutions in the first half of the year is likely to continue into the medium-to-long term, which will tighten the market and lead to platinum price increases.

The council says South Africa remains at risk of power outages and industrial action related to wage negotiations that are under way, which could disrupt mine supply.

Moreover, to avoid massive fleet carbon dioxide fines – stemming from strict emissions regulations in Europe – automakers are expected to promote diesel cars, which may lead to higher diesel car sales, and, therefore, increase demand for platinum.

The WPIC reports that total demand had increased by 4% year-on-year in the second quarter of the year, which was mainly owing to exchange-traded funds moving from net selling to net buying.

The council adds that this more than compensated for lower autocatalyst and jewellery demand in the quarter.

The WPIC says continued strong institutional demand this year may reflect recognition by seasoned and new platinum investors of the metal’s undervaluation and resurgent demand growth potential.