Platinum demand likely to tumble by 4% YoY

Despite double digit growth in Indian jewellery

Global jewellery demand down by 2% YoY!

Platinum supply will fall by 1% in 2018 YoY

This is in the accordance with the seventeenth Platinum Quarterly data set, published by the World Platinum Investment Council (WPIC)-which examines activity in the third quarter of 2018, with a revised forecast for full year 2018 and a first forecast for full year 2019. Independent analysis is provided by our research partners SFA (Oxford). 

The Foreword to the report describes platinum substitution for palladium in autocatalysts as a potential new demand driver, and notes that a range of WPIC partnerships are improving retail investors’ access to physical platinum. Also, our short pieces on platinum’s many and varied demand applications, described in our new 60 Seconds in Platinum publications, are now available as a free subscription through our website.

Key data from the study says, that mining supply in 2018 will fall by 1% from 2017. Weakness primarily in Russia will offset the small 15 koz production increase in South Africa, driven by a decrease in operational disruptions from last year. The update on 2018’s platinum supply and demand forecast raises the surplus from 295 koz to 505 koz, primarily on weaker jewellery demand.

Global demand for platinum is expected to fall by 4% in 2018 year-on-year, however with a number of positive indicators identified. Industrial demand is up 8%, driven by an 85% year-on-year increase in demand from petroleum, and a 19% increase in demand from glass. The expected rebound from petroleum comes after a weak 2017, on the back of refinery capacity shutdowns in Japan that have now passed. The glass demand increase is due to new plants coming online this year in China and RoW.

Double digit growth in Indian jewellery partially offsets reduced consumer spending and competition from low carat gold jewellery in China, leaving jewellery demand down by an expected 2% for 2018. The 2019 forecast shows a market surplus of 455 koz, 10% lower than the surplus in 2018 due to a 1.6% increase in supply and a 2.4% increase in demand. 2019 demand growth will be driven mainly by chemical and petroleum demand reflecting economic growth, and a doubling in investment demand as a rebound in ETFs adds to robust bar and coin demand.

Challenges remain in the automotive sector as European diesel appetite continues to decline on negative consumer sentiment, driven by uncertainty regarding diesel car restrictions in some European cities. Automotive demand is assumed to remain on its downward trajectory but at a slower rate.

The automotive platinum demand forecast for 2019 assumes no significant substitution by platinum for palladium in gasoline auto-catalysts; despite palladium’s price premium exceeding $300/oz. Economic and supply concerns argue strongly for automakers to consider a partial switch from palladium to platinum.

Though technological development and certification may pose switching costs, these are probably more than overcome by the current palladium price premium over platinum. Recycling platinum supply growth will remain at 1% year-on-year in 2019, due to additional autocatalyst supply, which will offset weaker jewellery recycling.