WPIC Calling for Smaller Platinum Deficit in 2015

On Tuesday, the World Platinum Investment Council (WPIC) released its latest quarterly report on platinum. The WPIC states that there was an overall market deficit in Q3; it is forecasting a deficit for the year overall with the market for platinum balancing in 2016.
“Overall, the platinum market is projected to be close to balance in 2016, with total mining supply and recycled platinum forecast to increase, with more modest demand growth across jewellery, industrial and investment segments,” said Paul Wilson, WPIC CEO, in Tuesday’s release. “These dynamics highlight the importance of the WPIC’s market development efforts in stimulating investment demand and we look forward to updating the market on a number of promising initiatives over the next few months.”
Platinum supply fell by 40,000 ounces relative to the previous quarter, as increased supply from South Africa was offset by a decrease in recycled metals. Meanwhile, jewelry demand increased by 260,000 ounces, and investment demand significantly increased on the back of net ETF increases in South Africa and strong bar sales in Japan. The WPIC states that bar purchases have been spurred by lower platinum prices.

Overall, the WPIC has reduced its full-year forecast from a deficit of 445,000 ounces to a shortage of 300,000 ounces. Stronger investment and automotive demand are expected to offset an expected drop in jewelry demand, as higher vehicles sales and higher amounts of platinum used per vehicle will amount to a 4-percent increase in demand for the sector relative to 2014.
Wilson also spoke about the Volkswagen (ETR:VOW3) vehicle emissions scandal and its effect on the white metal earlier this year, suggesting that worries over platinum prices as a result of the scandal were overdone.
“The last quarter has understandably been overshadowed by concerns about the impact of the VW scandal on diesel engines and the need for platinum catalysis. However, we believe that the negative implications for platinum demand, in both scale and rate of change, have been greatly overstated,” he said. “While October’s vehicle sales showed some slowing of growth, diesel cars in Western Europe are set to remain a major part of the car market and the largest global consumers of platinum for autocatalysts, so the prospects for this sector remain key to platinum demand growth.”
Volkswagen found itself in hot water this September when it was revealed that it had been using defeat devices to cheat on emissions tests in the US. Following that, the company admitted to using the devices on roughly 11 million vehicles worldwide. Some expected the news to have a negative effect on demand for diesel vehicles. That would put pressure on platinum demand, as platinum is used in catalytic converters for diesel vehicles.
However, other analysts remained positive on the metal, suggesting that the news could lead to an increase in the amount of platinum used in the converters. “We believe there is as much upside, as downside, for platinum demand from recent events,” Wilson concluded.
Spot platinum prices are currently sitting at about $842 per ounce. Year-to-date, the metal is down 31 percent.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.