WPIC: Platinum Deficit Forecast to Increase to 445,000 Ounces

The World Platinum Investment Council (WPIC) released its latest, quarterly report on the platinum market on Tuesday, changing its platinum forecast to predict a 445,000 ounce deficit up from an earlier 190,000.
The Council noted that while total supply is set to increase by 9 percent to 7.91 million ounces, a share rise in investment demand for the second and third quarters of the year has led to a revised platinum forecast for a deficit.
“The fourth edition of Platinum Quarterly shows that developments in Q2 2015 support the forecast deficit in 2015 of 445 koz, which is significantly up from the 190 koz forecast in May,” commented WPIC  CEO Paul Wilson in a statement. “This is despite a smaller deficit for Q2 2015 than the 230 koz deficit in the first quarter following improved mine supply and, partly as expected, the seasonal decline in Chinese jewellery demand.”

Demand

For Q2, the WPIC reported that total global demand for platinum was up 15,000 ounces to 2.04 million ounces. While platinum jewellery demand decreased 11 percent quarter-on-quarter, and industrial demand for the metal lost 4 percent, demand for platinum from the automotive sector remained strong, and there was a significant increase in investment demand.
Bar and coin sales rose to 60,000 ounces from 35,000 ounces in Q1, as the WPIC noted that Japanese investors took advantage of lower prices for the metal in their local currency. The quarter also saw a turnaround in ETF demand, shifting into net purchases of 45,000 ounces after three quarters of net sales. South African funds were responsible for most of those gains, increasing their holdings by 60,000 ounces all together.
Overall, the forecast for platinum investment demand has been upped to 310,000 ounces for 2015, and total platinum demand for the year is forecast grow by 4 percent to 8.355 million ounces.

Supply

Meanwhile, the platinum forecast on the supply side also saw sizeable increases, with South African production still rising as miners recover from 2014 strikes. Mine supply from the country rose to 1.08 million ounces, up from 890,000 in the previous quarter.
Supply from platinum recycling also increased 7 percent, while Zimbabwe upped its output by 20,000 ounces quarter-on-quarter, and Russia increased its platinum output by 10,000 ounces.
At first glance, that might not seem to bode well for predictions of a deficit. However, Wilson stated that the WPIC doesn’t see that positive performance continuing, citing a decrease in capital investment for the platinum mining sector in South Africa.
“While the past quarter has seen an improvement in mine supply due to improved mine performance, the medium term picture looks less promising,” he stated. “Our recently commissioned report by Venmyn Deloitte, an independent consultancy, highlights that the collapse of capital investment, from over $3 billion per annum in 2008 to under $1 billion per annum in 2015, has had a negative impact on South African platinum supply. Using capital expenditure alone as an indicator would imply that South African mining supply in 2016 and 2017 will be noticeably lower than 2015 levels and would support ongoing deficits in the platinum supply-demand balance.”
Platinum prices have continued their fall from 2014, losing 16 percent so far this year. However, spot platinum has gained 5.8 percent, or $55, since August 5, and is now trading at $1,003 per ounce. Certainly, platinum investors will be keeping an eye out for more updates from the WPIC.

Company news

Platinum Group Metals (TSX:PTM) reported Friday that it had filed its technical report for its Waterberg joint venture project in South Africa. Results of the report, including an updated resource estimate for the project, were originally released on July 22.
Platinum Group Metals, which owns a 58.62 percent interest in the project, upped the resource estimate for Waterberg to 12.61 million ounces of platinum, palladium and gold in the Indicated category and to 25.64 million ounces of platinum palladium and gold in the Inferred category.
On Tuesday, Bloomberg reported that Anglo American Platinum (JSE:AMS) Sibanye Gold (NYSE:SBGL) would provide an update on the sale of platinum assets by Anglo American. According to the news outlet, Anglo American and Sibanye have been in talks regarding the sale of Anglo’s Rustenburg mines in South Africa for over a year.
**Update: On Wednesday morning, Anglo American announced the sale of its Rustenburg operations to Sibanye Gold.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.