Demand for platinum set to soar as global risk makes precious metals more attractive
THE WORLD Platinum Investment Council (WPIC) expects platinum demand for 2020 to soar as the increased global risk and monetary and fiscal policy responses to the Covid-19 crisis boosted the appeal of precious metals, including platinum.
In its latest quarterly report, released yesterday, the WPIC, which was established to stimulate investment demand in platinum, said the revised forecast had moved the platinum market into an annual deficit of -336 000 ounces compared to the prior estimate of a 247 000 ounces surplus.
WPIC chief executive Paul Wilson said that since the platinum and gold price lows of $599 an ounce and $1 474 an ounce, respectively, in March, platinum had significantly outperformed gold, rising 55 percent versus gold’s rise of 33 percent by the end of last month.
“At times of crisis, this is no anomaly. In the two years subsequent to the price lows of the Global Financial Crisis in late 2008, platinum weekly returns outperformed those of gold by between 30 and 65 percent. With investment demand and platinum’s fundamental outlook up in 2020, this significantly enhances the outlook for platinum,” Wilson said. Platinum group metal producers have been riding the wave of the rally in the palladium and rhodium price environment that has boosted their fortunes.
Wilson said the platinum market demand and supply had both been significantly reduced year-on-year by the impact of the Covid-19 pandemic.
“However, due in part to some sup
ply issues unrelated to the pandemic, plus the nature of physical investment demand, the potential effects of the pandemic on platinum’s market balance are far less negative than previously expected, Wilson said.
According to the report, supply in the second quarter of 2020 fell by 35 percent year-on-year, or 748 000 ounces, to 1.40 million ounces mainly on the impact of the Anglo American Platinum Converter Plant (ACP) outage and South Africa’s Covid-19driven mining lockdowns. Refined mine production in 2020 is forecast to fall 15 percent, or by 927 000 ounces compared to 2019, to 5.16 million ounces. South Africa is expected to account for 95 percent or 886 000 ounces of this fall.
“Around 550 000 ounces of the reduction in refined production from
South Africa is due to the well documented 80-day ACP smelting outage, with the balance due to pandemic-related mine closures and reduced capacity,” said the report.
Total platinum demand in 2020 is forecast to be 7.438 million ounces, or 11 percent, lower than in 2019, due to lower demand from all four demand segments, including automotive jewellery, industrial and investment.
However, total investment demand in 2020 is now forecast to be 1.06 million ounces, 15 percent lower than in 2019, but 455 000 ounces higher than previously forecast for the year.
“Indeed, heightened global risk is expected to continue to drive investor demand for hard assets, with bar and coin demand forecast to grow by 113 percent to 600 000 ounces,” said the report.