Platinum market faces largest shortfall in supply for a decade
The platinum group metals market faces another year of deficits, with platinum forecast for its largest supply shortfall in 10 years.
Primary supply of platinum, or the supply directly from producers, is expected to decline by 2% on-year to around 5.68 million troy ounces, while demand is expected to remain firm across all sectors, according to a new report by Johnson Matthey.
The shortfall in is expected to reach nearly 600,000 ounces, despite expectations of a small decline in production of light duty internal combustion engine vehicles, a modest uptick in autocatalyst recycling, and more sales from Russian producer stockpiles.
The hoped-for recovery in primary and secondary platinum group metal production fell short of expectations in 2023, hindered by plant maintenance and electricity shortages at South African smelters and refineries, and fewer end-oflife vehicles entering the scrap market, said Rupen Raithatha, Johnson Matthey’s market research director to Dow Jones Newswires.
On the other hand, demand from the automotive industry, where platinum metals are used to reduce emissions in internal combustion engines, significantly exceeded expectations, jumping by 8% to reach around 13.1 million ounces, the highest level since 2019.
At the same time, while battery electric vehicles made strong gains in market penetration, the widespread take-up of zero emission cars has been slower than analysts had previously estimated.
This year, the automotive demand for platinum group metals is expected to decrease slightly, as the trend towards electric vehicles continues. But the shift towards electrification still faces challenges, including charging, infrastructure, and generally more expensive prices for the consumer, keeping the market for platinum metals in internal combustion engines sizeable.
“The direction of travel seems to be set, and legislative proposals mean we must move towards electrification—but the road isn’t going to be as smooth as people had been predicting for a few years now,” Raithatha said.
Industrial consumption of platinum has also been steady at around 2.8 million ounces over the last three years, close to historical highs despite geopolitical and economic headwinds. Demand has been particularly strong from the Chinese chemicals and glass sectors.
These deficits haven’t been reflected in price movements, which have generally remained subdued. Platinum has risen 3.2% over the last week to $985.8 an ounce, but remains down 9.35% over the last year.
All three major South African platinum group metal producers Sibanye-Stillwater, Anglo American Platinum and Impala Platinum have announced restructuring programs in response to weak prices, though these primarily target cost and head-count reductions, along with deferral of replacement and expansion capital expenditure, rather than near-term closures of existing assets.
As such, immediate effects on platinum group output will be limited— but cuts to capital expenditure will inevitably degrade longerterm production capacity, Johnson Matthey said. There are further key risks to the outlook, too. Disruption to primary supply is very possible, given the volatile political and economic situation in South Africa, responsible for around 69% of the world’s supply. The extent of a recovery in scrap collection is an unknown, while battery electric vehicle uptake and the subsequent hit to internal combustion engine production remain threats, Raithatha said.
Platinum has risen 3.2% over the last week to $985.8 an ounce, but remains down 9.35% over the last year