The platinum deficit for 2016 will be lower than anticipated by the World Platinum Investment Council and will continue in 2017.
The global demand for platinum, that is used in catalytic converters, laboratory equipment and jewellery, is forecast to decrease by 3 percent year-on-year to 8.04 million oz.
Total platinum supply is also expected to be marginally lower year-on-year at 7.87 million oz.
WPIC CEO Paul Wilson said:“The deficit for 2016 has been revised lower this quarter, reflecting a slowdown in retail jewellery sales in China, accentuated at the manufacturer level, due to the higher-than-expected levels of retailer jewellery recycling this year.”
But WPIC, the global market authority on physical platinum investment, continue to see medium term growth prospects in China as significant.
Supply and demand to fall by 2 percent
As the platinum market reaches its fifth consecutive year of deficit in 2016, the forecast for next year is looking similar. WPIC said on Tuesday that 2017 will be the narrowest year since 2011.
Total platinum supply in 2017 is forecast to fall 2 percent to 7.75 million oz, while total platinum demand is also forecast to fall 2 percent year-on-year to 7.85 million oz.
The projected growth in jewellery demand will not be enough to make up for the expected declines in automotive, industrial and investment demand.
Autocatalyst demand is expected to decline 1 percent next year as diesel’s overall share of the autocatalyst market falls, the WPIC reported.
WPIC’s director of research Trevor Raymond said: “At the moment, the 2016 percentage of diesels on European roads is 50 percent. Our forecast for next year includes a 48.5 percent diesel share, so that’s a fairly aggressive fall.”
But just last week, Johnson Matthey, the world’s largest platinum and palladium refiner, said that the platinum market could return to surplus for the first time in six years in 2017 as a result of a fall in autocatalyst and jewelry demand.
“As demand in the Chinese jewelry sector seems set on a downward trend, market balance will likely depend on the extent of growth in autocatalyst recycling and the level of physical investment,
“Unless the latter remains at similar levels to those seen in 2016, we could see the platinum market return to a surplus for the first time since 2011,” it said.
However, JM agreed with the expected deficit reported for 2016 by WPIC, as they said that it was likely that the platinum market would record a shortfall of 422,000 ounces this year.
“With spot platinum prices at a discount of $290 per oz to gold prices, we see platinum prices as underpriced at these levels,” they said.
Platinum deficit to impact investments
A rise by 15 percent in platinum investments is expected by the end of 2016, but the forecast for 2017 shows a fall by more than a quarter, as reported by WPIC.
But they believe that platinum will remain at the vanguard of lowering diesel emissions for many years to come and will continue to play a crucial catalytic role in fuel cell electric vehicles.
“We firmly believe that the opportunities for investors considering platinum as an investment are considerable,” they said.
Palladium price has gone up by 20 percent since the beginning of the month and as a result the price gap to platinum has decreased to below $200 per troy ounce, occasionally reaching its lowest level since July 2002, Commodities Daily reported.
As of 3PM PST, platinum was at US$946.30 per ounce.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.