Rapid global economic recovery set to boost demand for platinum

DEMAND for platinum is poised to benefit from a rapid global economic recovery and is set for a 5 percent year-on-year increase in 2021 to 8.041 million ounces, the World Platinum Investment Council said in its platinum quarterly report for March 2021 published today.

The council said this would result in a third annual market deficit of 158 000 ounces, up from a previous estimate of 60 000 ounces, mainly due to the strong automotive and industrial demand countering the lower forecast investment demand.

For the first quarter of 2021, platinum posted a marginal 19 000 ounce deficit on strong industrial, automotive and jewellery demand as the sustained investment demand for platinum outstripped recovering but constrained supply.

Industrial demand jumped 44 percent in the first quarter of 2021 compared to a year earlier on a six-fold increase in demand year-on-year from the glass sector to 279 000 ounces as demand for use in screens and building material surged.

The council expects the improvement in global economic activity to see demand for platinum in industrial applications increase by 25 percent, with notable rises in demand from the chemical and petroleum sectors.

The growth in automotive and the green hydrogen agenda involving the early production of green hydrogen from renewable electricity were also expected to fuel demand.

Council chief executive Paul Wilson said the report pointed to the fact that platinum demand and supply sectors were poised to benefit from this rapid economic recovery and government fiscal support.

“Manufacturing sectors gaining momentum will increase platinum consumption, and in turn this will stimulate investment activity – for both short- and long-term investors,” said Wilson.

The council expected 2021 platinum supply to rise by 16 percent to 7.883 million ounces, a reflection of the severe impact on supply in 2020 of Covid-19-related curtailment of operations and processing plant shutdowns unrelated to the pandemic.

The council said supply in the first quarter of 2021 was up 11 percent compared to the first quarter of 2020.

“The Anglo American Platinum (Amplats) converter plant that returned to operation in early December 2020, ran throughout the first quarter of this year, while platinum mines in South Africa operated without any of the shutdowns to prevent the spread of Covid-19 experienced in the first quarter of 2020,” said the council.

Mine supply was expected to rebound in 2021 on the growth in South African production following the easing of Covid-19 disruptions.

The council, which was created by the world’s leading platinum makers to stimulate platinum investment demand, said it expected 2021 mine supply to rise by 20 percent to 5.957 million ounces following last year’s disruptions. It said South African production would likely grow by 32 percent, citing that the Amplat’s converter plant Phase A unit had continued to achieve designed capacity.

“There is concern from some investors that this material could be processed quickly through the concentrator in 2021 and result in a supply glut that could weaken price. This is not the case, and Anglo American Platinum has confirmed in public statements in February and April that the processing of the platinum in material built up ahead of the ACP in 2020 will be processed over the course of both 2021 and 2022,” said the report.

Platinum prices averaged $1 162 (R16 398) an ounce during the first quarter of 2021, up 29 percent year-onyear, and 23 percent quarter-on-quarter, representing the highest quarterly average price since the first quarter of 2015.