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Platinum demand grows 26% in Q1, expect more supply deficits

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(Kitco News) - A growing supply deficit appears to be business as usual for platinum, and according to the World Platinum Investment Council (WPIC), the market is starting to see growing investment demand in anticipation of higher prices due to the ongoing supply crunch.

Monday, the WPIC released its quarterly report on the platinum market, which showed the fourth consecutive quarter with a supply deficit. Due to growing demand and shrinking supply, the deficit reached 19,000 ounces in the first three months of 2021.

The WPIC said that it expects platinum will see an annual deficit of 158,000 ounces this year.

The report said that global platinum demand increased to 1.969 million ounces, a rise of 26% compared to the first quarter of last year.

"A major positive for the platinum market is that we see industrial demand growing as the global economy continues to recover. Renewed industrial demand is also attracting new investors to the market," said Trevor Raymond head of research at the World Platinum Investment Council.

Looking at platinum's industrial market, the WPIC said that demand in the first quarter of the year was 201,000 ounces, up 44% compared to last year.

While the WPIC noted a six-fold increase in platinum demand within the glassing sector, Raymond said auto-sector demand continues to dominate the marketplace.

Although a shortage of semi-conductor chips has disrupted car and truck production, Raymond noted that the supply-chain concerns hadn't impacted the platinum market. He added that even if car sales remain weak, there is demand from higher platinum loading in catalytic converters required to meet tightening emission standards.

Platinum is a critical metal in catalytic converts in diesel-powered vehicles used to reduce harmful greenhouse gases. The report noted that they expect platinum demand in the auto sector to rise above pre-pandemic levels.

However, Raymond noted that investors are starting to see value in an undervalued asset as industrial demand picks up.

The WPIC said that investment demand in the first quarter overall investment demand increased to 140,000 ounces, up 96% year-over-year.

"ETF holdings grew for the fourth consecutive quarter in Q1'21, as anticipated substitution gains in autocatalysts and platinum's use in hydrogen technologies continued to attract investor interest," the report said.

"Today's report points to the fact that platinum demand and supply sectors are poised to benefit from this rapid recovery and support. In addition to stimulus packages, climate action is now heavily featured on many governments'agendas, adding further impetus to the attraction of green technology metals such as platinum," said Paul Wilson, CEO of the World Platinum Investment Council, in a statement.

Manufacturing sectors gaining momentum will increase platinum consumption, and in turn, this will stimulate investment activity – for both short- and long-term investors.

The WPIC also reported an increase in the platinum jewelry market.

"In 2021, platinum jewelry is expected to recover, growing 9% above the prior year to 1,978 koz, and close to 2019's levels (2,099 koz), with improvements particularly in the North American, European, and Indian markets," the report said

On the supply side of the platinum market, Raymond said that investors should get comfortable with supply deficits. He explained that the WPIC expects the market to see constrained supplies for the next three years.

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