Platinum Market Set to be Balanced in 2018

Platinum production was on the rise in 2017, but the market is on track to be balanced this year, as supply declines and demand picks up pace, the World Platinum Investment Council (WPIC) says in its latest report.

Last year, platinum production increased by 1 percent while global demand fell 7 percent year-on-year, leaving the market with a 250,000-ounce surplus. However, the market is expected to return to equilibrium this year, with an estimated small surplus of 25,000 ounces.

In 2017, demand was down in the automotive industry. The report states that, “[d]emand fell 3 percent due primarily to falling demand in Western Europe. The market did, however, experience growth in commercial vehicles in China and the rest of the world.”

Platinum also seemed to lose some of its appeal within the jewelry sector. Last year, global demand slipped 2 percent to 2,460,000 ounces as gains in other regions struggled to offset the decline in China.

Overall, investment demand in 2017 stood at 260,000 ounces, which was lower than the previous year. The reason for this was primarily a decrease in Japanese bar buying.

However, ETF investment rebounded strongly in 2017 after two years of declines, with global holdings rising by 95,000 ounces. The US staked claim to the largest increase, with investors adding 90,000 ounces to their holdings.

As quoted in the report, “[d]emand for platinum is forecast to grow marginally to 7,790,000 ounces, as a recovery in industrial demand and an increase in jewellery demand outweigh a decline in automotive demand and slightly lower investment demand.”

Expectations that jewelry demand will rebound plays a significant role in what is believed to be a tighter year for the platinum market. In particular, industry experts feel that there will be continued demand growth for platinum jewelry in India for 2018, even with a lower absolute level than previously expected.

For its part, industrial platinum demand is forecast to grow by 6 percent year-on-year. This increase is supported by a partial recovery in petroleum requirements and growth in chemical catalysis, glass and other industrial end uses.

Meanwhile, investment demand is predicted to remain flat at 250,000 ounces for 2018, with ETF holdings forecast to expand this year.

As 2018 continues on, the WPIC believes that platinum production will see a 2-percent decrease, thanks largely to reduced output from South Africa following mine closures in 2017. The report notes, “[t]otal mining supply is expected to decline by 4 percent to 5.85 million ounces in 2018.”

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.