Platinum demand soars in 2023, fuelled by supply concerns

A new report has identified declining platinum production, fuelled by electricity supply issues in South Africa, as a key component in a significant increase in demand for the silvery metal.

The World Platinum Investment Council (WPIC) is forecasting record breaking demand for the precious metal in a number of areas, with a significant deficit forecast for 2023.

The WPIC recently produced a revised platinum deficit forecast increase of up to 77% for 2023, with demand increasing by 28% and supply falling one per cent year-on-year.

The Council said platinum is attracting a surge in investor interest, driven by heightened global uncertainty, platinum’s strong demand growth and concerns about risks to mine supply.

The WPIC’s latest report said there were a number of market developments during the first quarter of 2023 that in total had led to a significant impact on market balances.

It noted that mine supply was significantly curtailed in South Africa by the worsening electricity shortage there. This led to increased work-in-progress concentrate at the major producers, with production levels remaining uncertain from a timing perspective as utilising excess smelting capacity is dependent upon the availability of electricity.

In comparison Russian mine supply increased. The net impact was a seven per cent year-on-year decline in total mine supply to 1,201koz.

Balanced against the supply decline was a significant jump in bar and coin investment, up 71% year-on-year to 102koz, propelled by a marked recovery in Japan.

The WPIC has forecast that this trend may continue for the full year, with an increase of 79% forecast.

Meanwhile, net platinum ETF holdings grew by 43koz in Q1’23, reversing the previous six quarters’ net disinvestment.

The WPIC also expects this trend to continue in 2023. The result will mean net investment demand of 433koz in 2023 – a swing of 1,073koz on 2022.

Price rise forecast

Platinum is expected to trade at US$1084.17 per troy ounce by the end of this quarter, according to Trading Economics’ global macro models and analysts expectations.

The commodity price forecaster tipped the metal with trade at US$1162.76 in a year’s time.

The metal was trading at around US$1071 per troy ounce on April 16.

Record industrial demand

A buoyant WPIC is predicting that industrial demand for platinum in 2023 will be the strongest on record.

It reported that industrial platinum demand grew eight per cent in the first quarter of 2023, driven by growth in chemical demand of 108% due to paraxylene capacity additions in China.

The Council has forecast industrial demand will grow by 17% year-on-year to 2,628koz.

Automotive demand also tipped to climb

Platinum demand from the automotive sector climbed nine per cent to 806,000 ounces in the first quarter.

This was supported by higher vehicle production and an increase in platinum use per vehicle.

On a full year basis, global automotive demand is expected to rise by 12% in 2023 to 3,255koz driven by a number of factors.

Mine production down

The WPIC found that refined mine production declined by eight per cent in the first quarter year-on-year and fell 11% against the fourth quarter of 2022.

The Council said that while mined platinum supply is forecast to fall by a modest one per cent to 5,511koz in 2023, as reductions in South Africa are partially offset by gains in Zimbabwe and North America, significant uncertainties still exist for South African platinum supply due to the impact of the country’s ongoing electricity shortages.

WPIC chief executive officer, Trevor Raymond, said mine supply remains highly challenged and is six per cent below the average production level since 2013.

To add to the dwindling supply side, global recycling of platinum fell 12% year-on-year to 413koz, due to reduced volumes of end-of-life vehicles.

The WPIC said the US regulatory environment aimed at curbing autocatalyst theft also hindered recycling volumes.

It forecast that full-year platinum recycling supply in 2023 will fall by one per cent to 1,682koz.