Platinum demand to increase 7% in 2022

Platinum demand rose 21% in 4Q 2021

 The World Platinum Investment Council-WPIC’s views on issues and trends relevant to those investors considering exposure to platinum as an investment asset, including a high level overview of the potential impacts from the Russian invasion of Ukraine, plus an update on how our product partnerships continue to meet investors’ needs. Here is the gazing of Platinum supply and demand for 2022 on the back of updating 2021. 

Total platinum demand rose 21% (+283 koz) quarter-on-quarter in Q4’21, with ongoing strong demand from the industrial and jewellery segments supplemented by improving automotive demand, despite ongoing semiconductor shortages. This was helped by improved but still negative investment demand, with ongoing strength in bar and coin demand offset by continued reductions in ETF holdings and stocks held by exchanges (primarily NYMEX), albeit at lower rates than in Q3’21. 

In the platinum market a further sign of the positive sentiment towards the metal emerged, as seen in North America, where rising prices attracted renewed buying interest, rather than triggering any material profit taking. However, Q4’21 total supply increased by 5% (+108 koz), exceeding total demand, with strong refined production in South Africa which was supplemented by the accelerated unwinding of Anglo American Platinum’s ACP semi-finished inventory, more than making up for flat quarter-on-quarter recycling rates.  

The net impact was a fourth quarter platinum surplus of 475 koz. The changes in supply and demand seen in Q4’21 highlight that 2021 was a year of two very different halves, with a modest surplus over the first two quarters (a net H1’21 surplus of 107 koz), escalating dramatically over quarters three and four (a H2’21 surplus of 1,125 koz) for an annual surplus of 1,232 koz.  

The big escalation over the second half was caused by the accelerated processing of Anglo American Platinum’s ACP semi-finished inventory driving up refined metal supply (up 219 koz half-on-half), semiconductor shortages reducing vehicle production and automotive platinum demand (down 144 koz half-on-half), and the large reduction in ETF holdings and NYMEX stocks (a half-on-half fall of 814 koz). 

The investment outflows seen in the second half of the year resulted in full-year 2021 investment demand being net negative (-43 koz), versus the exceptional record demand in 2020 (+1,546 koz). In 2021 total platinum supply increased by 21% and total demand decreased by 9%, resulting in the estimated platinum surplus for 2021 we reported in November 2021 of 769 koz increasing to 1,232 koz. 

However, despite the massive surplus in 2021, the spot platinum market remained tight, increasingly so in the latter part of the year with physical platinum in the London and Zurich spot markets reported as being hard to procure at times. 

This market tightness reflects ongoing strong speculative and quasi-speculative demand for platinum from China, which reported exceptionally strong imports during 2021, far in excess of its estimated demand (which is factored into our supply/demand balance). At the macro level, the scale of China’s imports versus its import demand requirements was such that they completely absorbed last year’s estimated surplus.

The outlook for 2022 is influenced by the continuation of many of the same themes that dominated the second half of 2021, with the additional overlay of inflation concerns and without the significant additional refined platinum flows from the unwinding of Anglo American’s semi-finished ACP inventory.  

Demand is projected to increase 7% (+520 koz) while supply will decline by a modest 1% (-61 koz). Automotive demand is expected to continue to grow, by 19% (+509 koz), but with growth still limited by the ongoing semiconductor shortage, which is expected to abate towards the end of the year. Jewellery demand is forecast to remain broadly flat year-on-year (+25 koz) on continued consumer preferences for new gold jewellery designs.  

Coming down from record strength in 2021, total industrial demand is forecast to contract 15% (-387 koz) as glass and chemical plant expansions slow. And finally, after a year of net negative investment (-43 koz), investment demand is expected to increase to 329 koz in 2022, with ongoing strong demand for bar and coin.

(+429 koz) and modest ETF demand (+50 koz) offsetting the expected further reduction in stocks held by exchanges (mainly NYMEX, -150 koz versus -139 koz in 2021).  

In aggregate, these supply and demand expectations result in a projected surplus of 652 koz in 2022, significantly down from the 1,232 koz surplus in 2021. While the forecast surplus in 2022 is material, the year has begun with a continuation of the physical market tightness experienced in 2021 as shown by ongoing backwardation, negative EFP rates and sustained lease rates.  

Although January 2022 China import data was not available when this report was finalised, these market tightness indications in 2022 suggest that China imports continue to exceed identified demand.