JOHANNESBURG – THE WORLD Platinum Investment Council (WPIC) yesterday projected an annual deficit of the metal this year and next year, with demand expected to outstrip supply on the back of ongoing processing disruptions in South Africa and mine closures due to the Covid-19 pandemic.
The WPIC said it expected the market to shift to a record annual deficit of 1.2 million ounces this year, compared with a prior estimate of 336 000 ounces only two months ago.
The council said the deficit would be -224 000 ounces for 2021.
“The -224 000 ounce deficit reflects a 17 percent pick-up in supply and a 2 percent increase in demand, with the latter largely due to lower, albeit still well above the historic trend, investment demand,” the report said.
The deficit comes as total platinum supply in 2020 is expected to fall by 18 percent to 6.73 million ounces, due mainly to mine supply curtailment and a 5 percent decline in demand.
The WPIC said the reduced demand in the automotive, industrial and jewellery segments was likely to be offset by strong investment demand, with demand volumes expected to be up 32 percent to a record high of 1.65 million ounces.
“Supply expectations for the year, already impacted during the first two quarters by Covid-related mine closures and the Anglo American Platinum (Amplats) converter plant (ACP) outage, have been further downgraded due to a similar, additional ACP closure until year-end, announced in early November,” said the report.
About 900 000 ounces were lost this year due to disruptions at the ACP, whose Phase B unit was shut earlier this month following a series of water leaks. The WPIC reported that total platinum supply for the third quarter fell by 5 percent year on year.
It said the return to production of South Africa’s mining operations from June, after Covid-19-driven lockdowns, plus the recommissioning of the ACP Phase B unit, saw South African mined production to rebound by 105 percent compared with the second quarter.
Demand in the third quarter surged 32 percent, compared with the same period last year, with investment demand climbing by 291 percent year on year in the third quarter. Exchangetraded funds’ demand in the quarter rose to 543 000 ounces, while the strong bar and coin demand continued, rising to 96 000 ounces.
The report said the strong V-shaped rebound in automotive markets in 2020 was expected to continue into 2021, with global light-duty vehicle production forecast to rise 15 percent next year to a total of 85 million vehicles and heavy-duty volumes projected up 5 percent.
The WPIC’s head of research, Trevor Raymond, said the platinum sector was in a better shape on the tightening of Chinese emissions regulations.
“In the last 18 to 24 months, things were tough for platinum mines, some were losing money and were closing mines. With the palladium and rhodium prices coming strong in the last year, they have made a lot of money,” Raymond said.