By Yusuf Khan
The platinum market is forecast to move to a nearly one million ounce deficit in 2023, amid stronger demand from the investment sector and constrained supply from South Africa.
The market is now expected to see a deficit of 983,000 ounces this year, a shift of 1.8 million ounces from the 854,000 ounce surplus seen in 2022, according to a new report from the World Platinum Investment Council released on Monday.
Much of the move has come from demand strengthening for the precious metal, WPIC said, with demand rising in the first quarter of 2023 to 2 million ounces–up from 1.691 million ounces in the fourth quarter of 2022–due to an upswing from the investment sector as well as continued improved buying in the auto and industrial sectors.
WPIC said that investors have been looking to platinum this year, largely in the form of exchange traded funds as well as buying physical bars and coins, similar to that of gold, where investors have been looking to precious metals as a hedge against inflation and economic strife.
Bar and coin demand for example is set to be 79% higher at 403,000 ounces in 2023. Total investment demand meanwhile is expected to come to 433,000 ounces in 2023–last year investment demand saw outflows of 640,000 ounces.
Auto demand has also continued in its recovery, expected to be 3.255 million ounces this year–up from 2.897 million ounces in 2022. WPIC said that auto makers have been substituting platinum for palladium in autocatalysts and due to higher emissions standards, the volume of platinum needed per unit has also risen.
Overall demand this year is now set to be at 8.176 million ounces, 28% higher than 6.401 million ounces in 2022, WPIC said.
Meanwhile, supply in 2023 is expected to remain strained. Platinum supply is heavily exposed to South Africa with 75% of mined supply coming from the country. South Africa’s power issues have meant that the refining industry has been significantly curtailed and so total supply is now expected to fall 63,000 ounces year on year to 7.193 million ounces.
WPIC’s Director of Research Edward Sterck said that in the first five months of 2023, the region has already experienced three quarters of the total load shedding seen in 2022. “It’s not looking great and we are going into peak electricity demand now,” he added in a call.
WPIC said that refined mined production fell 8% on year during the first quarter to 1.201 million ounces, largely because of the South African issues, where production alone fell 14%.
“While mined platinum supply is forecast to fall by a modest 1% (to 5,511,000 ounces) 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,” the report said.
Operational challenges in Russia are also hampering platinum supply, WPIC said, with production set to be capped 8% below the average seen over the past 10 years.
Write to Yusuf Khan at yusuf.khan@wsj.com
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