3 Key Ideas from the WPIC's Latest Platinum Report

The World Platinum Investment Council (WPIC) released its latest quarterly report on Wednesday (September 6), and according to CEO Paul Wilson, the theme for the period is “balance.”
“Our rich data set … shows a myriad of different trends and themes at work, all of which add up to a market in fundamental balance, albeit one with continuing supply constraints,” he says in the report, which covers platinum market activity during Q2 of this year.
As Wilson explains, overall platinum supply is expected to keep contracting this year, but a shortfall is unlikely — despite higher-than-expected demand from the auto and investment sectors, demand as a whole remains “lackluster.” Read on for brief overview of three of the report’s key ideas.

• Platinum supply will contract further this year — As mentioned, the WPIC sees overall platinum supply continuing to contract this year. The decline will be largely due to “closures of uneconomic mining at current market prices,” though secondary supply is seen decreasing as well. Total platinum supply is expected to fall by 2 percent year-on-year in 2017, coming in at 7.795 million ounces.

• Demand remains “lackluster,” but vehicle sector defying expectations — As platinum supply falls, demand is expected to remain “lackluster,” decreasing 6 percent year-on-year in 2017 to come in at 7.81 million ounces. The decline is set to come on the back of “contractions in each of the main demand sectors,” but the WPIC sees a number of segments performing better than anticipated. One is the automotive sector — “counter to many negative commentaries,” platinum demand for use in vehicles looks set to come in at 3.36 million ounces this year, down only 2 percent from 2016 and similar to 2014 and 2015 demand levels.

• Investment demand has been positive for six consecutive quarters — Another demand segment that looks set to put on a better-than-expected performance in 2017 is investment demand. Q2 marked the sixth consecutive quarter of positive platinum investment demand, says the WPIC, and its latest data “indicates that overall investment growth in 2017 is likely to be greater than expected” as long as the growth rate seen in the first half of the year continues in the next two quarters. That said, investment demand is still only predicted at 250,000 ounces, much lower than 2016’s 505,000 ounces.

The WPIC does not offer a platinum price prediction in its report, but it’s worth noting that the metal has performed fairly well so far this year. As of Wednesday at 2:20 p.m. EST, the precious metal was changing hands at $999.50 per ounce, up 12.43 percent since the start of 2017.
Many market watchers expect the metal to continue to perform well in the next half of the year, though prices won’t necessarily get much higher. In the latest Consensus Forecast released by FocusEconomics, over half the experts polled said they see platinum prices “ending the year below 2016’s levels and averaging below USD 1,000 per troy ounce in Q4 2017.”
Liberum Capital has the highest expectations for platinum in 2017, and is calling for an average annual price of $1,025; meanwhile, Capital Economics has the lowest estimate for the year at $900. As a whole the firms polled by FocusEconomics see platinum prices averaging $973 this year.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.