Edward Sterck: Platinum Facing Record Deficit, What's Holding Back the Price?

In its latest quarterly report, the World Platinum Investment Council (WPIC) forecasts that the platinum market will hit a deficit of over a million ounces in 2023 as demand jumps by 27 percent year-on-year and supply stays flat.

A deficit of that size would be the largest on record, and in a conversation with the Investing News Network, Edward Sterck, director of research at the WPIC, shared details on the demand- and supply-side factors driving the shortfall.

Looking first at demand, he said automotive, industrial and investment demand are all expected to rise this year, even against the uncertain economic environment that's continuing to affect many parts of the world.

Demand also looks promising in the long term. Although the rise of electric vehicles is driving questions about platinum usage in the automotive sector, Sterck said internal combustion engine (ICE) vehicles aren't going away just yet.

"We've done a lot of work on this, and our view is that not all vehicle roles and not all geographies are suitable for battery electrification with current technologies," he said, adding that the WPIC doesn't expect peak platinum demand until 2028.

Even at that point the organization expects usage to taper off only gradually. That's partially because of the transformative role of green hydrogen may play in the platinum market — green hydrogen can be used to power fuel cell electric vehicles, and platinum is used in the complex process of making green hydrogen. "In the future as ICE declines, it's likely that the fuel cell electric vehicles will take up the slack. In fact, we think they'll end up using way more platinum overall," said Sterck.

Against that backdrop of rising demand, platinum mine and recycling supply are both set to remain flat this year. And yet prices for the precious metal have remained persistently rangebound between US$900 and US$1,100 per ounce.

Sterck said part of the problem is that buyers have had to deplete existing platinum industries.

"If you do the math, they should have pretty much run through those inventories now. So coming through the second half of this year we'll have to wait and see what happens — perhaps platinum will begin to reflect the true underlying value," he said.

Watch the interview above for more from Sterck on the platinum sector.

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Securities Disclosure: I, Charlotte McLeod, 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.