LONDON, Sept. 6, 2023 /PRNewswire/ -- The World Platinum Investment Council (WPIC) today releases its Platinum Quarterly analysis for the second quarter of 2023, with a revised outlook for the remainder of the year.
For the third consecutive quarter, global platinum demand increased, rising 31% year-on-year (519 koz) in the second quarter of 2023. Strong momentum from year-on-year demand growth in the automotive sectors (19%, 136 koz ) and industrial (12%, 76 koz) added to the continued positive investment demand. For its part, the production of refined platinum fell 4% year-on-year (-65 koz), as did the recycling of automotive catalysts (-13%, -37 koz) and the recycling of jewelry (-9%, -9 koz). This led to a market shortfall of 348 koz in the second quarter of 2023, marking the first two consecutive quarters of platinum shortfalls since the second half of 2020.
These developments, which continue trends seen in the first quarter of this year, have led to a further upward revision of the shortfall forecast for the full year 2023 to 1005 koz, the largest shortfall on record in both absolute ounces and percentage terms. of the annual demand. Total supply is expected to remain flat, in line with the weak 2022 level of 7224 koz (-31 koz), while demand is forecast to increase significantly by 27% to 8230 koz (1738 koz).
Strong quarterly increase in vehicle production adds to factors driving growth in automotive platinum demand
Automotive platinum demand rose 19% yoy (136 koz) to 840 koz in Q2 2023 as semiconductor shortages continued to subside, leading to a positive rebound in vehicle production. Global light vehicle production increased 14% year-on-year, while heavy vehicle production grew 18%.
For the full year 2023, automotive platinum demand will be driven by increased vehicle production, with light vehicle and heavy vehicle production forecast growth of 6% and 7% respectively, the continued substitution of platinum for palladium and higher loadings of platinum group metals (PGMs). The tightening of Chinese regulations on heavy vehicle emissions (effective July 1, 2023) will increase demand for platinum as PGM-coated particulate filter systems are introduced. These factors will increase the global demand for automotive platinum in 2023 by 13% (381 koz) to 3283 koz.
Upward revision of the industrial demand forecast for 2023
Industrial platinum demand reached 697 koz in the second quarter of 2023, up 12% year-on-year and its highest level since the third quarter of 2021. In particular, the chemical industry experienced a year-on-year increase of 87% (109 koz) thanks to higher demand for platinum catalysts from the paraxylene industry, which offset contractions in other areas of industrial demand. For 2023 as a whole, the industrial demand forecast, which had already broken records, has been revised upwards to 2,667 koz (14% yoy, 336 koz). This is largely due to increased capacity in glass (50%, 251 koz) and chemical (12%, 82 koz) applications. This will offset lower demand from the electric (-8%, -9 koz) and oil (-11%, -22 koz) segments.
Net investment demand of 386 koz forecast for 2023
As in the previous quarter, investor interest increased in Q2 2023, translating into positive net investment demand of 154 koz. Platinum ETF holdings increased by 155 koz in Q2 2023, their largest quarterly increase since Q3 2020, and by 196 koz since the start of the year, with significant renewed interest from South African funds (mainly for the mining shares of PGM). However, total ETF holdings are expected to smooth out over the remainder of 2023. Despite global bullion and coin investment falling to 26 koz (-64%, -46 koz) in Q2, it is Full year 2023 is likely to see a 45% year-on-year increase (102 koz) to 326 koz, the first growth in investment in bullion and coins in three years, driven by a return to positive net investment in platinum in Japan. The result will be a net investment demand of 386 koz in 2023.
Total supply remains limited
Refined mine production declined 4% (-65 koz) yoy in Q2 2023 to 1,464 koz as increases in North America and Russia were largely offset by declines in South Africa. After three consecutive quarters of declining supply, South African production improved this quarter, reaching 1028 koz. However, the year-on-year decline is still 9% (-101 koz), mainly due to the maintenance of processing assets, in addition to the disruptions caused by Eskom's load reduction. By 2023, mined platinum supply is forecast to be flat from 2022 (5,565 koz), although South African platinum supply remains vulnerable to ongoing electricity shortages.
Global platinum recycling declined 12% (-46 koz) yoy to 345 koz in Q2 2023. Supply of used automotive catalysts declined 13% (-37 koz) yoy as vehicle supply held at end of its useful life less than expected. Full-year platinum recycle supply is forecast to decline 4% to 1620 koz.
Trevor Raymond, CEO of the World Platinum Investment Council, commented: “The main drivers of the projected growth in platinum demand of 27% in 2023, including strong growth in automotive and industrial demand, were clearly seen in the second quarter, and settled on the bases established in the two previous quarters. These favorable conditions are projected to continue into 2023. Looking beyond the current Platinum Quarterly, our study shows that growth in automotive and industrial demand will underpin total demand growth in 2024 and beyond. This offers investors both short- and long-term value incentives, as well as protection against the downside risks posed by inflationary headwinds and high interest rates. Meanwhile, continued power cuts in South Africa, the main producer, have exacerbated the deficit and maintained the downside risk to mining supply. In the second quarter of 2023, this combination of demand growth and limited supply was compounded by strong ETF inflows, all of which have contributed to widening the gap between platinum supply and demand.
“As the deficit increases, it is important to highlight the reduction in the availability of acreage reserves to cover it, and to consider the consequences of all this. By the end of 2023, surface stocks will account for only five months of annual demand, and most of these stocks will be held in China and cannot be easily exported to meet global shortages, raising concerns about the availability of oil. metal. This, together with the sustained growth in demand and the fact that the supply of the mines continues to be at risk, further strengthens the arguments in favor of investing in platinum.
“Similarly, the link between platinum and the hydrogen economy is becoming more well known. Green hydrogen produced by platinum-containing electrolysers has an important role to play in the energy transition. Although hydrogen-related platinum demand is relatively small in 2023 (most relevant in a tight market), it is expected to grow substantially in the medium term, and could become a proxy stock for investors seeking exposure to global decarbonization. ».
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Neither the World Platinum Investment Council nor Metals Focus are authorized by any regulatory authority to offer investment advice. Nothing in this document is intended to be or should be considered investment advice or an offer to sell or advise on the purchase of securities or financial instruments, and appropriate professional advice should always be sought before making any type of investment. For more information, visit www.platinuminvestment.com
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