(Kitco News) - The platinum market continues to be defined by growing deficits as demand outpaces supply.
On Tuesday, the World Platinum Investment Council (WPIC) published its Platinum Quarterly report for the second quarter of 2024, stating that it expects the market to experience a one-million-ounce deficit this year. This year's deficit follows last year's shortfall of 731,000 ounces.
Although the platinum market is expected to face its largest supply deficit in over a decade, prices remain under pressure. October platinum futures last traded at $944.20 per ounce, down 0.30% on the day.
Despite the price struggles, investors are beginning to take more notice of the undervalued platinum market. In an interview with Kitco News, Edward Sterck, Director of Research at WPIC, noted that the biggest surprise in the second quarter was a significant increase in investor demand.
According to the report, investment demand rose by 462,000 ounces in the second quarter, up from 117,000 ounces in the first quarter. WPIC anticipates investment demand to increase by 517,000 ounces this year, a 15% rise from 2023.
"During Q2 2024, investment demand surged to its highest level since Q3 2020, driven by a substantial inflow of 444,000 ounces into platinum ETFs," the report said. "Strong growth in physical investment in China, particularly in the large bar (500g and above) category, will more than compensate for weak bar and coin demand elsewhere."
At the same time, the report noted that jewelry demand also grew, rising to 501,000 ounces, up 7% from last year.
"For the full year 2024, historically high gold prices will help platinum jewelry demand grow by an estimated 7% (+126,000 ounces) year-on-year, reaching 1,994,000 ounces. In India, jewelry fabrication is expected to show further strong growth, with a 28% increase, while Japan's demand is forecast to rise by 8% year-on-year to 365,000 ounces, the highest level since 2019. European demand is projected to reach a record high in our time series, growing by 4%. Meanwhile, demand in North America is also forecast to hit a record high, growing by 3% this year," the report said.
Sterck commented that renewed demand in these two sectors is a significant indication of the deepening deficit in the platinum market. He added that these deficits are continuing to erode above-ground stocks, which should eventually influence prices.
He further stated that the second-quarter data provides solid confirmation of the market's deficits.
"We expect that underlying fundamentals should offer some support for prices," he said. "We are confident that there will be further deficits in the platinum market."
While investment and jewelry demand are providing fresh momentum for the market, 80% of platinum demand comes from industrial use and the automotive sector.
The WPIC reported modest growth in industrial demand in the second quarter, rising to 638,000 ounces from 627,000 ounces in the first quarter.
"Industrial demand is forecast to reach 2,369,000 ounces in 2024, marking a 1% year-on-year increase over the elevated levels of 2023. Glass demand in Q2 2024 increased by 48% year-on-year to 216,000 ounces, due to Chinese LCD capacity expansions that were delayed from 2023. As a result, a 47% year-on-year increase in glass demand is expected for the full year 2024," the report said.
Automotive demand remained relatively stable, increasing to 820,000 ounces compared to 822,000 ounces in the first quarter.
"Automotive platinum demand in 2024 is forecast to reach a seven-year high, growing by 1% year-on-year to 3,237,000 ounces, despite a downward revision in global vehicle production estimates to 91.1 million units. This growth continues to be supported by softer consumer demand for battery electric vehicles (BEVs) and the continued growth in hybrid vehicle numbers," the report said.
However, demand is only one side of the equation. Sterck emphasized that supply is not keeping up with demand.
"For the full year, total platinum supply is expected to decline by 1% from the already weak levels of 2023, reaching 7,089,000 ounces. While recycled supply is projected to see a modest year-on-year increase of 2% to 1,581,000 ounces, this gain will be offset by a 2% year-on-year decrease in mined supply, which is expected to drop to 5,508,000 ounces," the report said.
Looking ahead, Sterck said that the market is unlikely to see any significant changes in supply.
"There are no new investments in production that will lead to a meaningful increase in supply," he said.
