The global platinum market deficit will rise sharply next year thanks to resurgent demand from the jewellery and industrial sectors and declining production, an industry report said.
The shortfall will jump to 275,000 ounces from an expected 15,000 ounces this year, the World Platinum Investment Council (WPIC) said in its latest Platinum Quarterly report.
That would put the industry in deficit for a sixth consecutive year and cut above-ground stocks to 1.605 million ounces by the end of next year, said the WPIC, which is funded by platinum mining companies.
“For five years these stocks have been feeding deficits … it does appear the platinum market is much tighter than it’s ever been in the last five or six years,” said the WPIC’s head of research Trevor Raymond.
Platinum prices have risen 5 percent this year after hitting a more than seven-year low in 2016, but lagged palladium, which is up 45 percent. In September palladium became more expensive than platinum for the first time since 2001.
Both metals are used in the vehicle industry for emissions-cutting catalytic converters but platinum is used more in diesel engines which have fallen out of favor following the Volkswagen emissions scandal in 2015.
Platinum use in autocatalysts, which accounts for more than 40 percent of platinum demand, will fall 1 percent in both 2017 and 2018, the WPIC forecast.
Overall, the WPIC said platinum demand would rise 2 percent to 8.030 million ounces next year after falling 6 percent in 2017 to 7.845 ounces.
Double digit growth in India and a stable market in China is expected to drive jewellery usage up 3 percent next year, the first rise since 2014, while a rebound in demand from the petroleum and glass sectors is projected to raise industrial usage by 9 percent.
The WPIC said output would fall 1 percent in 2017 and 2018, with production in South Africa, which accounts for more than half of total supply, falling 2 percent next year due to mine closures.
Years of low capital investment mean output will stay low, said Raymond. “Decline is likely to continue and more importantly the ability to increase output is extremely low. It takes a lot of time to get output to increase.”