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Platinum to see 190K surplus this year as supply normalizes - World Platinum Investment Council

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(Kitco News) - The platinum market is facing growing bearish momentum as the price trades near its lowest level since November.

According to the latest quarterly report from the World Platinum Investment Council, although demand has picked up, the precious metal is seeing rising supply as mines and a major refiner in South Africa comes back online. In its report for the second quarter, the WPIC said that the platinum market is expecting to see a modest surplus for 2021 as mines operate at 97% capacity.

The report said that the platinum market saw a surplus of 161,000 ounces in the second quarter. That could grow to 190,000 by the end of the year.

In a recent interview with Kitco News, Trevor Raymond, director of research at the WPIC, explained that last year the platinum market was severely disrupted after Anglo American's PGM refinery in South Africa went offline. However, this year the company has been able to process more stockpiled more than expected, which is forecast to push mine supply up by 17%.

Although the platinum market is looking at a surplus this year, Raymond said that the sector still faces dwindling mine supply.

"In the next two years, it is likely we are going to face more deficits than surpluses as production slows down," He said.

Raymond also noted that the increase in supply shouldn't take away from the strong demand the precious metal is seeing. The WPIC said that global platinum demand is up 352,000 ounces in the second quarter, increasing 23% from last year.

Raymond said that although physical demand continues to be impacted by COVID-19, the market is starting to reset itself after two years of historical demand and market disruptions.

Looking at the entire year, WPIC said that they expect platinum demand to rise to 7.75 million ounces, a 1% increase compared to 2020.

The auto industry is leading platinum demand. The precious metal is a critical component in autocatalytic converters to reduce harmful greenhouse gas emissions from diesel engines. 

According to the WPIC, automotive demand for platinum rose by 285,000 ounces or 75% in the second quarter.

"Had it not been for stoppages across the world, as the semiconductor shortage persisted, demand for platinum would have been higher – by an estimated 50 Koz," the WPIC said in the report.

Outside of the autos sector, the report said that industrial demand increased by 188,000 ounces or 46% and exceeded pre-pandemic levels.

"The global chip shortage is definitely a COVID hangup," said Raymond. "Automotive demand and industrial demand are both at higher levels than in 2019. But that hasn't received much attention at all."

While industrial and automotive demand has picked up, the platinum market has struggled to attract new investors. The WPIC said that jewelry demand increased by 73,000 ounces or 19% in the second quarter. European and North American markets drove the jewelry demand. The Asian market saw a 25% decline in the second quarter.

Investor demand in the second quarter totaled 191,000 ounces, a 50% fall from last year. For the year, investor demand for physical bullion and exchange-traded products is expected to total 521,000 ounces, a 66% decline from last year but still well above the pre-pandemic average.

Although platinum is struggling to attract attention in the marketplace, Raymond said investors can't discount the impact the green energy transition will have on the precious metal.

"Platinum is right in this sweet spot as people think about how we decarbonize," he said. "Platinum will have an important role in the decarbonization of the global economy.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.