LONDON, March 10, 2021 / PRNewswire / –
- Supply fell 17% in 2020, while demand fell by just 7% and a deficit of -932 koz – the largest on record
- Third consecutive annual deficit forecast for platinum in 2021
- Automotive platinum demand in 2021 is expected to grow 25%, accelerated by Chinese heavy-duty vehicles
- Investment demand remains strong as platinum’s links to the hydrogen economy continue to generate investor interest, while platinum remains severely undervalued relative to gold and palladium
The World Platinum Investment Council (WPIC) has its today Platinum quarterly for the fourth quarter of 2020, which also includes a revised forecast for 2021.
For the third consecutive quarter, platinum posted a -170 koz deficit in the fourth quarter of 2020 as strong automotive, industrial and jewelry demand and continued strong investment demand for platinum outpaced the limited supply.
Overall, the platinum market deficit in 2020 was -932 koz, the largest on record, despite a year the world economy contracted 3.5%. While total demand fell by 7% (-569 koz), the sharp 20% (-1.203 koz) decline in mining supply and the 10% (-210 koz) decline in recycling contributed to total supply increasing 17% ( – 1,413 kilos).
With widespread vaccine programs causing the economy to return to normal, platinum demand is expected to increase 3% (+254 koz) to 7,992 koz while supply is expected to recover 17% (+1,126 koz) to 7,932 koz, resulting in a deficit of -60 koz in 2021, the third consecutive annual deficit. Demand growth in 2021 is expected to be primarily driven by a strong recovery in automotive, jewelry and industrial demand, which will offset reduced but very strong investment demand.
Resurgent automotive sector
Demand for platinum automobiles rose 5% (+31 koz) year over year in the fourth quarter of 20 due to a healthy recovery in light and heavy commercial vehicle production. North America in particular, platinum demand rose 17% (+13 koz), including strong growth in light diesel vehicles, which helped offset declines in other parts of the world. Heavy vehicle production grew 7% worldwide, led by China increase by 21%. Heavier PGM-loaded catalysts, required to fully comply with the rapidly approaching legislation in China VI, contributed to a 51% (+29 koz) increase in platinum demand in that region.
Light commercial vehicle production is expected to recover in 2021, reaching a level just below that of 2019. Despite this slight decline, platinum demand for the automotive industry is expected to increase by 25% (+606 koz), mainly due to higher vehicle production, increased loadings to meet stricter emissions regulations and to replace palladium with platinum in gasoline aftertreatment systems.
Platinum investment demand remains high
In Q4’20 investment demand was 63% (+51 koz) higher than in Q4’19, although it was 86% (-827 koz) lower than in Q3’20, even the highest quarterly total on record. Net purchases of bars and coins more than doubled year over year, increasing 112% (+32 koz), while ETF holdings grew 74 koz for the quarter, up 56% year over year.
Investors remain keenly interested in platinum: its key role in the hydrogen economy, the production of green hydrogen and its use in fuel cell electric vehicles, the accepted views of a significant short-term substitution of platinum for palladium, and the significant discount on both gold and palladium all suggest strong future fundamentals. While investments in platinum in bars and coins, as well as in ETFs are expected to remain strong in 2021 – likely to be above the 5-year average – they are unlikely to exceed the exceptional levels of 2020. The demand for platinum bars and coins is expected to be 15% (-90 koz) lower but will still remain elevated. Overall, the global net ETF investment portfolio is expected to increase by 250 koz (approx. 50% below 2020).
Strong recovery underway in the jewelry sector
Jewelry manufacturing turned positive in Q4 20, up 7% (+32 koz), with a notable increase in demand in North America – the first quarterly increase year-on-year 2020 of 4% (+4 koz) – and in China – the third year-on-year increase since Q1’17 by 15% (+31 koz).
In 2021, aggregate jewelry demand is projected to increase 13% (+234 koz) above 2020 levels, with improvements in each market as the economy returns and the worst of COVID-19 is over.
Paul Wilson, CEO of the World Platinum Investment Council commented: “In a year of extremes like 2020, we have become accustomed to the term ‘record highs’ in what we saw and read due to its high discount to gold and palladium and its significant short- and long-term demand growth potential at high global risk .
“After surviving the dark days of the pandemic and global economic slowdown, we are now considering the possibility that the world will return to normal. The positive momentum of the economic recovery in the second half of 2020 is reflected in the fact that activities have resumed and demand for platinum has rebounded in the automotive, industrial and jewelry sectors.
“However, as we get out of the pandemic, we are now looking at the role platinum must play in global decarbonization – one of the clearest global imperatives to emerge during the pandemic. Platinum is the key to the production of green hydrogen and in fuel cells. ”For electric vehicles, and this understanding among investors is growing rapidly. As the availability of hydrogen increases and production costs decrease, fuel cell vehicles will likely need more than one million ounces of platinum per year within 10 years due to accelerated global investment in decarbonization.In addition, the rapidly increasing substitution of platinum for palladium in auto catalysts within require more than a million ounces of platinum per year for four years.
“The combination of this significant growth in demand combined with the rally in recent months could well lead to increased investment demand from investors with short and long-term investment horizons. We continue to see an increase in the number of investors who had not previously considered platinum, drawn to the strategic fundamentals of demand for this unique metal. When these investors look closely, they see the deep discount from platinum to gold and palladium and the compelling demand growth potential will greatly increase the likelihood of an increase in investment demand. “
Disclaimer of liability
Neither the World Platinum Investment Council nor Metals Focus have any regulatory authority to provide investment advice. Nothing in this document is intended or should be construed as investment advice or an offer to sell or buy any security or financial instrument, and appropriate professional advice should always be sought prior to making any investment. More information is available at www.platinuminvestment.com
SOURCE World Platinum Investment Council (WPIC)