JOHANNESBURG (miningweekly.com) – Global platinum demand will marginally outpace supply in 2019 – increasing by 2.4% and 1.6%, respectively – the World Platinum Investment Council (WPIC) announced in its latest 'Platinum Quarterly' report on Wednesday.
WPIC research director Trevor Raymond noted that the WPIC’s global platinum 2019 forecast shows a market surplus of 455 000 oz, which would be 10% lower than the surplus of 505 000 oz in 2018.
The WPIC quarterly update includes the expectation that some of the positive trends of this year will continue into 2019, such as the downtrend in automotive demand slowing but not necessarily reversing, an uptick in exchange-traded fund (ETF) investment, and persistent demand for industrial applications.
Additionally, “jewellery demand will see its first yearly increase since 2014”, with demand growth in India and North America to offset weak Chinese demand.
Raymond explained that the third quarter of this year saw a turnaround in ETF investment, with outflows in the second quarter reversing to net buying. He expects ETF investment to remain positive into and throughout 2019 owing to “investors finding the price discount to rhodium, gold and palladium fairly interesting”.
He also noted that the WPIC has been fielding questions from investors who have noticed that about 2 000 oz of platinum was substituted for palladium in gasoline autocatalysts after palladium exceeded $1 000/oz. “The current widening gap between rhodium, palladium and platinum prices, suggests that there should be some substitution by automakers,” says Raymond, which has positive demand implications for platinum demand, which translates to improved investor sentiment.
Additionally, “with bar and coin investment, the low platinum price is certainly helping demand”. Raymond added that the WPIC’s work to increase awareness and establish partnerships with mints and other stakeholders has resulted in more platinum investment products.
“Increased awareness, increased product availability and a low price, along with positive ETF activity, should see investment demand doubling from 125 000 oz this year to 250 000 oz in 2019.”
In terms of industrial demand, Raymond noted that it tends to have a directly proportional relationship to the world economy. “If the world does well, industrial demand does well.” He added that the slowing Chinese economy has had some impact, but that the global economy is still showing positive growth, so industrial demand remains positive.
Automotive demand, which is expected to decline by 35 000 oz next year, could be poised for positive growth beyond 2019. Raymond commented that the recognition that there has been “heavy” investment into battery electric vehicles has positive connotations for fuel cell electric vehicles, which have a similar platform.
“The more battery vehicles, the more likely that fuel cell electric vehicles will come into play.” He noted that placing an electric battery in a long-haul truck is and would be uneconomical and impractical but, “a heavy-duty fuel cell truck makes a lot of sense. We see early platinum demand growth in trucks preceding material use in fuel cell cars”.
Additionally, the WPIC has not included its expected substitution of palladium in its 2019 forecast. Raymond explained that this is as a result of the fact that automakers have not explicitly confirmed that the substitution will take place. However, the reasons for a substitution are evident, specifically because in the third quarter the palladium price outstripped the platinum price by more than $300/oz.
SUPPLY
Raymond expects new North American supply to come on stream in 2019; however, the primary factor in the marginal increase in supply in 2019 will be stable operational performance at Southern African platinum mines.
He noted that the sector performed well in the third quarter this year, as it did in quarter two, and that 2018 as a whole saw fewer operational disruptions, in terms of reduced Section 54s (stoppages owed to safety incidents), and reduced industrial action. The WPIC supply forecast assumes similar stability will continue into 2019.