1 January 2020: Higher diesel sales to reduce massive EU CO2 fines increases platinum demand growth potential: Average CO2 per new car sold in the EU is increasing, meaning automakers face potentially significant fines for missing 2021 CO2 targets. Commentary on strategies to mitigate these fines has focussed on battery-only vehicles and their sales growth. However, many automakers are strongly favouring the mild hybrid diesel and its plug-in version as vital in reducing the fines they will pay. Such hybrid diesel vehicles produce far less CO2 than equivalent gasoline or even diesel models. Growth in sales of mild hybrid and plug-in mild hybrid diesel vehicles will reduce CO2 fines and boost automotive platinum demand in 2020.
Platinum Perspectives
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1 December 2019: Weaker Chinese jewellery demand is not offset by growth elsewhere, despite the sustained low platinum price: Net Chinese jewellery demand is over 800 koz lower than it was five years ago and is still trending downwards but at a slower rate. Absent significant growth in other regions, jewellery demand remains the weakest element of the investment case for platinum, despite record price discounts to gold and to palladium. Total jewellery demand will remain largely dependent on a recovery in jewellery fabrication in China.
1 November 2019: Platinum recycle supply growth is steady, largely unresponsive to price and unable to compensate for lower mine supply in 2020: Historically, platinum recycle supply has grown based on past vehicle platinum loadings, the scrappage profiles of vehicles and, counterintuitively, rising jewellery sales in China as platinum’s largest jewellery market was established. We illustrate the nature of automotive recycle supply through palladium where its massive price increase has left its expected recycle supply largely unchanged.
1 October 2019: Weakness in auto sales are not a strong reason to expect a PGM price pull back: Historically, tightened emissions levels rather than increased vehicle sales caused strong PGM demand growth. This trend has been evident in China this year. In addition, we consider if meaningful platinum demand growth will come from substitution in several low-temperature applications in gasoline vehicles and in palladium-containing diesel autocatalysts.
1 September 2019: Platinum ETF holdings are up 38% and its price is up 20% yet many commentators believe platinum’s fundamentals are still poor: Large macro funds that were slow to participate in the gold rally have used platinum futures as a proxy for gold and as an alternative to negative yield assets. We expect further growth in investment demand for the remainder of this year as investors continue to factor platinum’s relatively low price ($577/oz below gold and $723/oz below palladium) and improving supply-demand outlook (surplus down to 345 koz in 2019f from 675 koz in 2018).
1 August 2019: Above Ground Stocks (AGS) increase insight when considering platinum as an investment asset: Above Ground Stocks are a natural part of the physical metal market and have not proved an impediment to higher prices for palladium and nor should they for platinum. Platinum ETF buying of 755 koz in 2019 has tightened the physical market, making holders of unpublished AGS less likely to sell. We believe platinum’s current demand growth potential is a more likely driver of the platinum price now.
1 July 2019: Automaker strategies to reduce multi-billion Euro CO2 fines increasingly include achieving higher diesel sales: The 2009 EU legislation to reduce CO2 takes effect in 2021. From September 2019 all new diesel cars sold will be Euro 6d TEMP, or RDE, compliant and will finally be ‘clean’ (in NOx terms). This makes it easier for automakers to promote diesel sales including mild hybrid and plug-in hybrid diesel models and is positive for platinum demand.
1 June 2019: Industrial demand has grown at twice the rate of global growth in the last 5 years and is now the largest portion of net platinum demand: This recent growth, above its long run correlation with global GDP, has partly offset easing Chinese jewellery and European autocatalyst demand. Industrial demand growth is driven by global economic growth and advances in technology but can exhibit short term changes unrelated to macro trends. Steady industrial demand growth, now and in future, underpins platinum.
1 April 2019: Bar and coin and ETF demand are important to the platinum investment case: Given the low current platinum price and the spectacular 2019 year-to-date growth in ETF holdings, it is worth looking at the relative roles of owned and exchanged traded investment in physical platinum.
1 March 2019: The overall PGM picture looks strong, despite the platinum surplus: Palladium’s 2019 market deficit is estimated to approach 1 moz, assuming zero investment demand. This more than exceeds the combined surpluses estimated for platinum and rhodium. As the metals are to a significant extent fungible, a large market imbalance in one metal should result in a rebalancing among the PGMs, as we discuss in this report.