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.
Platinum Perspectives
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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 Platinum ETF buying of 755 koz in 2019 has tightened the physical market, making holders of unpublished AGS less likely to sell.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.
1 February 2019: Platinum provides some diversification benefit for portfolios: Recent market volatility reminds us of the importance of portfolio diversification. Adding a risky asset to an existing portfolio reduces overall portfolio volatility when the new asset has a correlation <1.0 with the existing portfolio. Our note explores platinum’s diversification dynamics and qualities.
1 January 2019: Sustained palladium futures curve backwardation has ramifications for platinum: When futures curves change shape, they can impart valuable market information. The palladium futures curve has been in backwardation for over a year, a sign of a shortage in the metal. This is another indicator arguing for substitution of palladium by platinum in automotive applications, in our view.
1 December 2018: FCVs represent material long-term platinum demand: We investigate the potential impact of fuel cell electric vehicles on platinum demand, building a baseline forecast anchored on announced fuel cell vehicle and infrastructure plans in Japan, China, California and elsewhere. We find it generates material demand in the coming years.