Platinum ETF Outflows Continue, Chinese Demand Grows

Dipping to a 22 month low of US$824 per ounce at the beginning of September, platinum prices have begun to trend higher, supported by increased demand out of China, as well as the automotive, jewelry and industrial segments.

A seasonal casualty of the summer doldrums, platinum’s fundamentals for the rest of the year are expected to add to its current price momentum, which has pushed the metal back to the US$900 level. Despite a projected surplus of 974,000 ounces this year, the physical platinum market remains tight due to a resurgence in Chinese demand during Q2.

According to Trevor Raymond, director of research at the World Platinum Investment Council (WPIC), an additional 1.2 million ounces of platinum were imported to China last year above the country’s identified demand.

“We saw the same thing happen in the first half of this year,” Raymond told INN. “And forecasting that, it looks almost like an additional 1.3 million ounces above the identified demand in China; that could absorb the entire surplus.”

The WPIC's Q2 review, released in early September, notes that some of China's excess supply “reflects the significant increase in loadings to ensure compliance with China VIa as well as continued substitution for palladium in gasoline vehicles.”

Heightened need out of China during the first six months of 2022 drove platinum lease rates to a historically high 10 percent in May, which is highlighted in the WPIC's press release for the report.

“The sustained high platinum lease rates we have been seeing throughout 2022 — the highest in ten years and higher even than those seen during the peak of the pandemic when moving materials was extremely challenging — are a clear indication of shortages of physical metal in the market,” Paul Wilson, CEO of the WPIC, wrote.

As Wilson added, the already tight market situation has been further compounded by constrained mine and recycled supply. Most notably, recycled supply stemming from spent catalytic convertors declined 20 percent year-over-year during the second quarter.

This trend is anticipated to continue as inflation and the chip shortage deter new vehicle purchases, and is expected to result in a 15 percent total reduction in automotive recycling for the year.

Q2 also saw a 7 percent drop in mine supply as production out of South Africa contracted by 3 percent due to “power outages, adverse weather conditions and operational challenges.” North American output was hindered as a result of a mine flood in Montana and processing maintenance in Sudbury, shrinking regional production by 13 percent.

The 21 percent year-on-year drop in mine supply from Africa and North America was offset by an increase in Russian output.

“In terms of Russian platinum production, the only reason that it's sort of up 18 percent (is the) flooding last year at the Norilsk Nickel mine,” Raymond said. “As a result of that flooding, 2021 output was depressed and 2022 output is at a normalized level, but it's certainly higher.”

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

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.