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Platinum demand gets 'automotive boost' in 2023, deficit widens - WPIC

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(Kitco News) - The World Platinum Investment Council (WPIC) reports that automotive demand for platinum this year will reach its highest level since 2017 and now forecasts a platinum deficit of over one million ounces for 2023.

WPIC said that “strong” automotive demand growth is a key factor behind the widening deficit of platinum, in addition to industrial demand growth to record levels, and flat supply.

According to the report, platinum automotive demand is expected to reach 3,283 koz in 2023, up 13% on 2022, the highest level since 2017.

While automotive demand for platinum continues to be driven primarily by platinum-for-palladium substitution, which is forecast to reach 615 koz in 2023, and higher loadings, it has received a boost from “higher-than-expected” growth in vehicle production during the second quarter of 2023, the council said.

“This is because the impact of the semiconductor shortage and other supply-chain challenges experienced by the automotive industry as a result of the pandemic and, more latterly, the Russian invasion of Ukraine, have eased considerably,” the analysts found.

Importantly, WPIC noted that during the quarter, light-duty vehicle (LDV) production saw a “healthy” increase of 14% year-on-year, while heavy-duty vehicle (HDV) production improved by 18%.

According to WPIC, in North America, vehicle production improved by 15% year-on-year in Q2 2023, while in Europe, platinum automotive demand increased by 11% on the back of strengthening LDV production which also increased 11% year-on-year.

More importantly, automotive demand for platinum in China during the quarter surged by 60%, primarily due to the implementation of China IV for non-road vehicles, as well as the HDV segment, where output recovered by 64%, while LDV production grew by 17%.

On top of that, Japan’s LDV production of petrol and diesel cars increased by 20% compared to the same quarter in 2022, which was heavily impacted by semiconductor shortages. Elsewhere, production also improved by 11% year-on-year, resulting in a further lift in platinum demand.

“Despite challenging macroeconomic conditions and cost of living concerns, demand for new vehicles exceeded supply, which supported higher production rates,” WPIC wrote.

According to WPIC, platinum is one of the rarest metals in the world, with unique physical and catalytic properties making it highly valued across a number of diverse demand segments, including key technologies that make it a critical mineral for the energy transition.

Automotive demand for platinum is the single largest demand segment for platinum. It has been between 31-46% of total demand in the last five years.

Platinum’s diverse industrial uses make up the second largest demand segment, accounting for between 26-36% of total demand in the last five years.

Global annual jewellery demand has been between 23-30% of total platinum demand over the last five years, while investment demand ranges between 10%-20%.

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