- Platinum supply forecast to fall 5% in 2022, while demand to
increase 2%
- Despite unprecedented headwinds, annual automotive demand in
2022 forecast to rise 16%
- Strong jewellery demand in Europe, North
America, Japan and
India unable to offset falls in
pandemic-affected China
- Strong underlying platinum industrial demand masked by reduced
expansions in glass
LONDON, May 16, 2022
/PRNewswire/ -- The World Platinum Investment Council (WPIC) today
publishes its Platinum Quarterly for the first quarter of
2022, with a revised full year forecast for 2022.
Unprecedented events in Q1'22 had a huge impact on both the
supply of and demand for platinum, adding a layer of complexity on
top of pre-existing issues, which will continue well into 2022.
During the quarter, both demand (-26%) and supply (-13%) fell
year-on-year leaving the market in surplus of 167 koz. However, for
the full year, supply is expected to be 5% less than in 2021, yet
demand to be 2% greater.
The surplus forecast for 2022 has now been reduced to 627
koz, which is also notably down on the surplus in 2021 (1,128
koz).
Constrained supply
Q1'22 saw confirmation that the processing of semi-finished
inventory built up during the 2020 Anglo American platinum
converter plant (ACP) shutdown had been completed. With mine
production no longer receiving the one-off supply boost from the
ACP inventory unwind, a clearer picture of underlying production
levels emerged this quarter. South African production in Q1'22 fell
16% (-167 koz) year-on-year, to quarterly levels below those seen
in 2019. Platinum mine supply in South
Africa is forecast to decline 9% in 2022 (-421 koz) and is
at risk of potential strike action related to three-yearly wage
negotiations. Russian output also declined in Q1'22, down 11%
year-on-year (-21 koz) with the operating environment in
Russia becoming increasingly
challenging due to the geopolitical situation and sanctions against
Russia. Overall, global refined
mine production is forecast to decline 7% (-425 koz) year-on-year
to 5,872 koz.
Recycling supply was constrained during Q1'22 (-20%
year-on-year) due to reduced volumes of end-of-life vehicles as a
result of fewer new vehicles being sold – an issue that will
persist yet ease throughout 2022. Full year platinum recycling
supply is forecast to decline by 2% (-43 koz).
Notable automotive demand despite severe challenges
Against a backdrop of shortages of semiconductor chips and other
parts, zero-COVID protocols in China, and disruption in Europe due to Russia's invasion of Ukraine, total platinum automotive demand this
quarter was remarkably strong. Demand was flat on Q1'21 (725 koz),
and is expected to increase by 16% (+412 koz) in 2022, due to a
rise in light duty vehicles produced, higher loadings due to
tighter emissions regulations and continued platinum substitution
to partially replace palladium in gasoline vehicle catalysts.
Jewellery demand rises in all regions except China
A jump in the number of weddings, price-led gains from gold in
bridal and further growth for luxury brands saw platinum jewellery
demand rise in Europe and
North America in Q1'22 – a trend
which is forecast to continue throughout the year. Jewellery demand
also grew in Japan, albeit from a
low base. In India, platinum
jewellery demand rose in Q1'22, with fabrication expected to grow
to a record high in 2022.
However, this could not offset a fall in jewellery demand in
China, where platinum fabrication
fell by 36% year-on-year in Q1'22, partly due to the negative
impact of the Omicron outbreak. Sales are expected to gradually
pick up in the second half of the year as the pandemic-related
impact is expected to ease. Overall global platinum jewellery
demand declined by 9% (-42 koz) year-on-year in Q1'22, and is
forecast to decline 2% (-37 koz) to 1,886 koz in 2022.
Underlying industrial demand above 2019 levels
Petroleum demand in Q1'22 rose by 21% (+8 koz) year-on-year,
especially in Europe and
North America, where refining
output had picked up considerably as the recovery from COVID
continued. Similarly, as health service utilisation is recovering
towards pre-pandemic levels, demand for platinum in the medical
sector was up by 15% (+8 koz). Both sectors are forecast to see
demand growth in 2022.
Meanwhile, platinum glass demand fell 56% (-179 koz)
year-on-year in Q1 22 as expected. This seemingly dramatic drop was
due to unusually high demand in Q1'21, as significant investment in
new plant capacity was completed and plants were commissioned. This
reduced requirement from the glass sector was a significant factor
in overall industrial demand falling by 25% (-175 koz) in Q1'22
year-on-year, and the forecast of a 16% decline in 2022, albeit
that 2022 industrial demand is still expected to be the third
strongest year on record.
Investment demand affected by yen weakness and ETF
liquidations
Bar and coin demand increased from 21 koz in Q1'21 to 60 koz in
Q1'22. However, despite particularly strong demand in North America, global demand growth was
limited by US dollar price strength sustained by a significant
subsequent weakening in the yen which drove local platinum prices
to their highest since May last year and which encouraged
profit-taking among Japanese investors. This trend is expected to
continue into the next quarter, with global bar and coin demand for
the full year forecast to decline by 23%.
For ETFs, liquidations in Q1'22 stemmed primarily from one
European ETF issuer and were contrary to investors' finding hard
assets attractive due to surging inflationary worries and elevated
geopolitical and economic uncertainties. A modest inflow in ETF
holdings over the remainder of this year is forecast, resulting in
a 50 koz full-year outflow.
Paul Wilson, CEO of the World
Platinum Investment Council commented:
"At the start of Q1'22, most regions were at various stages of a
post-COVID economic recovery. However, Russia's invasion of Ukraine at the end of February sent shockwaves
through the markets, which will be felt for months and years to
come. This new layer of complexity, on top of existing
COVID-related factors and operational challenges, will add to the
wider markets' volatility.
"With the backlog of semi-finished inventory built up during the
2020 Anglo American Platinum converter plant (ACP) outages now
processed, we are left with the stark reality that South African
production is actually below where it was in 2019. This, combined
with a massive drop in recycled material, points to constrained
supply for the coming months, as demand continues to grow.
"While the cost of the tragic war in Ukraine will not be known for some time, the
potential indirect impact it could have on platinum is
considerable. Security-of-supply concerns, particularly for
palladium have arisen in the wake of Russia's invasion of Ukraine and given Russia's importance to the global supplies of
mined palladium and, to a much lesser extent, platinum. This could
increase platinum for palladium substitution efforts and modify the
procurement and inventory management strategies of a wide range of
market participants.
"In addition to decarbonisation, security of energy supply for
all Governments is now a far greater issue than it was. The role of
green hydrogen in reducing European gas imports could drive a
strategic acceleration of electrolyser construction, which would
benefit platinum directly but also support the infrastructure
needed for broad-based commercial adoption of FCEVs. Investors
looking for green opportunities are becoming increasingly aware
of platinum's key strategic role in unlocking hydrogen's
crucial contribution to achieving global net zero targets; being
used in both electrolysers to produce green hydrogen and in
hydrogen fuel cells."
Disclaimer
Neither the World Platinum Investment Council nor Metals Focus
is authorised by any regulatory authority to give investment
advice. Nothing within this document is intended or should be
construed as investment advice or offering to sell or advising to
buy any securities or financial instruments and appropriate
professional advice should always be sought before making any
investment. For further information, please visit
www.platinuminvestment.com.
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SOURCE World Platinum Investment Council (WPIC)