World Platinum Council Report: The semi-conductor shortage is still weighing on platinum
(Kitco News) - The World Platinum Council has released its latest report and this comes off the back of the 26% fall in the price since mid-February. There have been some serious headwinds for platinum as the semi-conductor shortage meant that the slowdown in car manufacturing dented demand for the commodity. There have also been significant investment outflows in funds that focus on the precious metal.
The report kicked off by saying "Platinum demand for the total of automotive, jewelry and industrial applications in the third quarter of 2021 continued the steady year-on-year quarterly recovery seen since the fourth quarter of 2020. However, this demand declined by 4% from the second quarter as semiconductor shortages reduced automotive demand, and weaker industrial demand was not offset by stronger jewelry demand. However, the greatest change in demand in quarter three was due to outflows from ETFs and stocks held by exchanges, resulting in total platinum demand pulling back 44% year-on-year."
Looking at mine supply, the WPIC said "higher refined supply, up 13% year-on-year as accelerated processing of the 2020 semi-finished stock overhang continued to boost underlying South African mine supply, resulting in the quarterly surplus of 592 koz. These developments have contributed to the increase in the platinum surplus now forecast in 2021, up from 190 koz to 769 koz. Whilst this is a significant surplus, we note that China imports have run well ahead of demand, potentially absorbing much of the excess metal supply, and resulting in reduced metal availability in the market"
In regards to the future, the report said "Base-case forecasts for the areas of supply and demand uncertainty potentially err towards the conservative. They assume: the semiconductor shortage will continue to reduce vehicle production; automotive recycling supply will be sustained despite lower scrappage rates; relatively low rates of platinum substitution for palladium; low PGM loadings in China relative to other regions; and continued negative demand from both South African ETFs (rotating into PGM equities) and exchange stocks."
As you can see from the chart below the price of platinum has fallen significantly since February. There has been a string of consistent lower highs and lower low waves and the $909oz support area seems to be an important line in the sand. On the upside, the price has a previous wave high at $1104/oz. If there is a fundamental change in the landscape of the semi-conductor shortage then the upside levels could be targeted. For now, the support levels are in focus.