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Platinum Week-Platinum Surplus For 2019 Slashed After Jump In Investment

Kitco News

By Eric Onstad

LONDON, May 13 (Reuters) - A surge in investment demand has slashed expectations of a large surplus this year in the global platinum market, the World Platinum Investment Council (WPIC) said on Monday.

In March, a report by the WPIC forecast global oversupply of 680,000 ounces of platinum this year, its largest oversupply since at least 2013.

But the industry group, which uses data from an independent consultancy, said in its latest report that the 2019 surplus was now forecast at 375,000 ounces.

A jump in demand by institutional investors for platinum ETFs (exchange traded funds) in the first quarter has dramatically changed the outlook, said Trevor Raymond, director of research at the WPIC.

Holdings of physically-backed ETFs climbed by 690,000 ounces in the first three months of this year, the strongest rise since the ETFs were launched in 2007.

"Investors have been telling us that they would need to see a combination of factors before they could comfortably act," he said in an interview.

"In the first quarter we had the combination of rising prices, a downside supply risk in South Africa and there were several demand growth signals, the two most important being more diesel cars on the road and the potential for platinum to be used in gasoline vehicles."

While the spot platinum price has shed more than 40 percent over the past five years, it has rebounded by nearly 10 percent so far this year.

It appeared that ETF buyers were long-term investors such as pension funds, encouraged by stabilisation in the diesel market, Raymond added.

While appetite for platinum had soured since Volkswagen's "dieselgate" scandal in 2015, the proportion of diesel cars in the key West European auto market has crept up in recent months after touching a low around 32% late last year, down from about 50% in its prime, Raymond said.

Emissions-reducing catalytic converters in diesel vehicles contain more platinum, while sister metal palladium is a larger component in gasoline engines.

Total platinum demand in 2019 is expected to rise by 8% while supply is due to increase by 4%, the report said.

The first quarter saw a 19% jump in mining supply, mainly due to the release of metal locked up by smelter repairs and maintenance in 2018.

But that is not expected to be repeated next year.

"Consequently, we expect 2020 refined production to be significantly below the 2019 level," the report said.

(Reporting by Eric Onstad; editing by Emelia Sithole-Matarise)

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