Platinum Supply remained 7% higher in 1Q

WPIC forecast to rise supply by 16% 

Jewellery Market Bureau:: The World Platinum Investment Council (WPIC) published Platinum Quarterly Q1 2021 and reviewed Platinum in 1Q. During Q1’21, the global economy continued to recover, underpinned by widespread stimulus measures. Scarcely a year on since the World Health Organisation declared Covid-19 a pandemic, the extent of the recovery in some areas has been surprising as pent-up consumer demand drove economic revival. 

However, in the automotive sector, supply chain difficulties became increasingly apparent, hampering the sector’s recovery against this backdrop, Q1’21 platinum demand increased 26% (+405 koz) year-on-year to 1,969 koz while total supply grew 11% (+187 koz) to 1,950 koz. Overall, this resulted in a modest deficit of -19 koz, compared to the Q1’20 surplus of 199 koz. 

For 2021 total platinum supply is now forecast to rise 16% year-on-year to 7,883 koz. However, it will remain below pre-pandemic 2019 levels, while total platinum demand is expected to rise by 5% year-on-year to 8,041 koz. As a result, the platinum market is forecast to remain in deficit in 2021, for the third consecutive year, with the shortfall expected to deepen to -158 koz from our previous projection of -60 koz. 

The revised forecast of total platinum supply in 2021, 16% higher than in 2020, reflects an expected 20% (+988 koz) recovery in refined production but only a 3% (+64 koz) pick up in recycling supply. The rise in total platinum demand in 2021, 5% (+378 koz) up on 2020 levels, is due to higher demand in the automotive (+557 koz), jewellery (+158 koz), and industrial (+486 koz) segments countering lower investment demand (-823 koz).

Despite forecast total investment demand in 2021 being 53% lower than the record levels in 2020, bar and coin demand and ETF demand are expected to remain robust at 436 koz and 250 koz respectively. 

The accelerating global economic recovery from the negative impacts of the Covid-19 pandemic in 2020, combined with platinum’s compelling demand outlook, is expected to provide a strong incentive for investors to continue to expand platinum exposure.

In the same period last year, 26 days of refined production were lost due to the total closure of the ACP. The country’s second wave of Covid-19, which peaked in mid-January, resulted in some further disruption to mining. In order to maintain effective Covid-19 protocols this year, producers delayed some employees’ return to work, following the December break. 

The impact for the quarter was however much reduced relative to the losses last year when most of the industry was shut for 6 days in the quarter at the time of the H1’20 national lockdown. Despite two major incidents, a structural failure at a concentrator plant and the suspension of operations at two mines following groundwater inflow, Russian production grew 23% (+34 koz) year-on-year. The ramp-up of a new precious metal production line allowed for a one-time drawdown in work-in-progress inventory, which buoyed refined output. Elsewhere platinum supply was little changed with no significant disruption for the period. 

Producers continued to build refined inventory, totalling 23 koz for the quarter. As such, these inventories returned to more normalised levels following a drawdown to support sales in response to the disruption of H1 2020. 

Additionally, record PGM basket prices and the growth in margins have eased pressure on revenues, resulting in less focus on releasing working capital.

Over all global recycling of platinum that rose by 18% (+85 koz) year-on-year during Q1’21 to 561 koz, remained driven by higher auto catalyst and jewellery feeds. 

The recovery of platinum from spent auto catalysts rose by 9% (+36 koz) to 429 koz. However, the growth rate was flattered by a slightly weaker Q1’20, as the impact of the pandemic had started to impact the sector. It is therefore more revealing to look at the quarter-on-quarter growth of just 1%. Jewellery recycling in Q1’ 21 rose by a hefty 69% (+48 koz). Almost all of the gains came from China and were in response to higher prices, fewer COVID restrictions and some retailers’ recycling unsold inventory to assist cash flows. While the rise was large, total jewellery recycling in Q1’21 was down on the prior two quarters despite higher prices. 

Overall global platinum demand rose by 26% (+405 koz) in Q1’21, with a significant portion of this growth driven by a downward revision to glass demand in Q1’20. The positive Q1’21 consisted of a 201 koz year-on-year increase in industrial demand and a 69 koz year-on-year rise in investment demand. Growth in both automotive and jewellery demand added 50 koz and 85 koz respectively. 

However, the quarter-on-quarter trend shows that global demand was effectively unchanged on Q4’20 as, in particular, both the chemical and petroleum sectors remained weakened by the effects of the pandemic.