Platinum Jewellery demand in 2021 to grow 13%

Total Platinum demand in 2021 to increase by 2% 

2021 outlook is with the accordance with World Platinum Investment Council (WPIC), that a focus on demand & supply both. Here is demand outlook; supply outlook is being carried here earlier! 

As the world emerges from the pandemic over the course of 2021, we expect economic activity to gradually return to near pre-pandemic levels and automotive, jewellery and industrial demand to grow. However, as investment demand is not expected to repeat the record in 2020 it will decline. Total platinum demand in 2021 is therefore expected to increase 2% (+150 koz) to 8,089 koz. 

We forecast a 24% (+575 koz) increase in automotive demand as light-duty vehicle production is set to increase by 11 m units to 85 m and heavy-duty vehicle production grows by 5%. Even though light-duty production is expected to be 4m units below 2019, platinum demand is projected to increase to 4% above pre-pandemic levels due to the increase in loadings and substitution of platinum at the expense of palladium. 

Full compliance in 2021 of light-duty vehicles in the EU with Euro 6d, full implementation of China 6b for light vehicles on 1 January 2021 and, most importantly, China VI implementation by July 2021 for heavy-duty vehicles contribute to these higher platinum loadings. 

This increase in platinum demand also includes some platinum being used in place of palladium in gasoline auto catalysts and some shift from palladium to platinum in diesel after treatment systems. Substitution in gasoline engines in 2021 is expected in China and North America, where there is slightly greater flexibility in auto catalyst homologation rules.  

Jewellery demand in 2021 is forecast to increase by 13% (+246 koz), with all regions seeing double-digit growth. This would leave total demand 28 koz down on 2019 pre-COVID-19 level, reflecting some lingering pandemic effects and lower sales due to expected higher platinum prices. Expected growth in North America is due to the normalisation of retailing activities (including stock replenishment), economic recovery, governmental stimulus support and still wide price differentials to gold. 

In Europe, low stock levels and increased demand from higher income groups, that have escaped the worst of the economic damage from the pandemic, could result in fabrication demand rising by as much as 20% in 2021. 

As China’s government is expected to maintain their successful virus containment protocols, consumption is expected to improve further. We expect jewellery demand to increase by 13%, helped also by the platinum-gold spread and a push by local retailers and manufacturers. 

Platinum use in the chemical industry is expected to rise by 15% (+90 koz) in 2021, with volumes just 3% (21 koz) below 2019 demand (which itself was a decade-high). All major areas are expected to record improvements next year, as economic activities gradually return to normal. An additional boost should come from China, where new mega-integrated refining and petrochemical plants are expected to come on-stream as the country remains committed to cut its reliance on imported petrochemicals in the long-term. 

Assuming the global economy gradually improves as we progress into 2021, so will global oil refining output. That said, platinum demand, at 158 koz (+37%) next year, will remain 28% below its pre-COVID level due to several factors. First, the pandemic is likely to lead to some long-lasting damage to the oil industry, with demand taking years to recover. 

Second, prior to the crisis, the oil industry had already faced structural overcapacity and depressed margins. Substantial losses this year may well force many companies to accelerate refinery rationalisation, with some operations in Europe in particular facing risk of permanent closure. Some of these negative factors should be offset by the ongoing expansion of newly integrated crude-to-petrochemical units in China.

In the electrical and electronics sector, energy-assisted magnetic recording drives with 9-10 platters offer further cost advantages. These are scheduled for commercial shipment in 2021, strengthening HDDs’ position in mass data storage. Despite this and following further inroads made by SSDs, platinum off take is forecast to decline marginally by 1% (-1 koz) to 135 koz in 2021. 

Medical demand is forecast to grow 8% (+19 koz) as demand for platinum based cancer treatments increase and the surgical procedures involving the use of platinum containing devices return to normal levels. Plans to continue building LCD glass furnaces, primarily in China, as well as ongoing increases in global glass fibre capacity, should continue to support demand for platinum from that sector next year. 

At 497 koz we forecast demand will increase by 4% year-on-year. Looking at other industrial demand we forecast a rebound of 15% to 556 koz next year, fuelled by higher automotive production, coupled with a rising number of sensors in each vehicle. Moreover, stationary fuel cell systems and green hydrogen electrolysis capacity are likely to start achieving some momentum towards the end of 2021. 

That said, headwinds from further waves of COVID-19 spread remain a major downside risk. Bar and coin demand in 2021 is forecast to ease back to 485 koz, a drop of 23% year-on-year (-144 koz). However, the total will still remain high by historical standards. We expect this strength to emerge from buying on price dips as price remains volatile and for liquidations to remain modest despite our higher price expectations. 

Following two years of unprecedented strong ETF demand, we anticipate that investment buying will slow down. Having said this, as the shadow of COVID-19 will most likely remain in place for a large part of 2021, investors should remain positive towards platinum and the wider precious metals complex. As deliveries into NYMEX in general have already slowed in October 2020 and on the assumption that arbitrage opportunities will over time wane, we expect to see exchange stock changes return to more normal low levels in 2021.