Projected surplus in 2022 is of 637 koz platinum

An updated outlook for 2021 and an initial forecast for 2022!

 Recently, World Platinum Investment Council (WPIC) published twenty-ninth Platinum Quarterly data set, which examines activity in the third quarter of this year and includes an updated forecast for 2021. This edition of Platinum Quarterly presents platinum supply and demand developments for the third quarter of 2021, an updated outlook for 2021 and an initial forecast for 2022.  

It also includes the WPIC’s views on issues and trends relevant to those investors considering exposure to platinum as an investment asset, plus an update on how our product partnerships continue to meet investors’ needs. The Platinum Quarterly data and commentary are prepared independently for the WPIC by Metals Focus.  

Platinum demand for the total of automotive, jewellery and industrial applications in the third quarter of 2021 continued the steady year-on-year quarterly recovery seen since the fourth quarter of 2020. However, this demand declined by 4% from the second quarter as semiconductor shortages reduced automotive demand, and weaker industrial demand was not offset by stronger jewellery demand. 

However, the greatest change in demand in quarter three was due to outflows from ETFs and stocks held by exchanges, resulting in total platinum demand pulling back 44% year-on-year. This, in combination with higher refined supply, up 13% year-on-year as accelerated processing of the 2020 semi-finished stock overhang continued to boost underlying South African mine supply, resulted in the quarterly surplus of 592 koz.

These developments have contributed to the increase in the platinum surplus now forecast in 2021, up from 190 koz to 769 koz. 

Whilst this is a significant surplus, we note that China imports have run well ahead of demand, potentially absorbing much of the excess metal supply, and resulting in reduced metal availability in the market.  

While many of the trends that have dominated 2021 are expected to continue into 2022, the degree of uncertainty associated with each varies. There is high confidence in both the expected growth of 1% in total mining supply for full year 2022 - which includes the boost from processing the final tranche of the stock overhang - and the expected reduction in industrial demand of 13% from the exceptional levels seen in 2021. 

Less certain, is the extent to which processing capacity limitations may curb the growth in autocatalyst recycling later in the year, and the extent to which vehicle sales and production will rebound as the semiconductor shortage is resolved. Similarly, growth from increased platinum loadings under tighter emissions regulations and the amount of platinum substituted for palladium may rise materially. 

Regarding investment demand, it is uncertain whether outflows from ETFs and exchange stocks will continue. Base-case forecasts for the areas of supply and demand uncertainty potentially err towards the conservative. 

They assume: the semiconductor shortage will continue to reduce vehicle production; automotive recycling supply will be sustained despite lower scrappage rates; relatively low rates of platinum substitution for palladium. 

Low PGM loadings in China relative to other regions; and continued negative demand from both South African ETFs (rotating into PGM equities) and exchange stocks. 

This results in a projected surplus in 2022 of 637 koz platinum. While this is a significant figure, demand upside, where forecasts are less certain, could reduce it materially. In particular, cessation of the outflows from South African ETFs and Stocks Held by Exchanges would reduce the forecast surplus by 250 koz, and we estimate that each additional million vehicles produced above current estimates would reduce it by 35 koz. 

Key data from the report, which can be downloaded here, are highlighted below: 

Global platinum demand for the total of automotive, jewellery and industrial applications in Q3’21 continued the positive year-on-year growth trend seen in the previous three quarters, however, negative investment demand and near record refined supply drove the market balance into a surplus of 592 koz this quarter. 

The forecast for 2021 is now revised to a surplus of 769 koz, while 2022 is forecast to see a surplus of 637 koz. Supply levels are being boosted by processing of semi-finished material from 2020, with total supply expected to be up by 19% in 2021, but for 2022 to be almost flat on 2019. 

Automotive demand is set to grow 14% in 2021, and a further 20% in 2022, despite semiconductor chip shortages ETF and exchange stock demand falls, while bar and coin demand grows, up 25% in Q3’21 and forecast up 10% in 2022 on global risk Industrial demand is expected to surge 26% in 2021, with 2022 to be above 2019 level Jewellery’s recovery from pandemic effects patchy, with Q3’21 down 5% but 2021 and 2022 both above 2020 level.