The World Platinum Investment Council (WPIC) today publishes its Platinum Quarterly for the third quarter of 2021, with a revised forecast for 2021 and first forecast for 2022.
Global platinum demand for the total of automotive, jewellery and industrial applications in Q3’21 continued the positive year-on-year growth trend seen in the previous three quarters, however, negative investment demand and near record refined supply drove the market balance into a surplus of 592 koz this quarter. The forecast for 2021 is now revised to a surplus of 769 koz, while 2022 is forecast to see a surplus of 637 koz.
Supply levels bolstered by unprocessed backlog
Mining supply continued to recover gradually from the COVID-19-related operational disruptions in 2020. In addition, processing of the 560 koz of semi-finished material, built up during last year’s Anglo-American Platinum converter plant (ACP) shutdowns, accelerated during Q3’21 and boosted refined supply by around 140 koz. This resulted in total mine supply in the quarter increasing 13% (+185 koz) year-on-year to 1,569 koz. Even with a 9% (-46 koz) decline in global recycling in Q3’21, total supply this quarter was up 7% (+138 koz) year-on- year.
For 2021, total mine supply is expected to reach 6,137 koz, up 25% (+1,231 koz) on 2020, with total supply up by 19% (+1,292 koz) to 8,114 koz. In 2022, total supply is forecast to be almost flat on 2019 at 8,235 koz (+ 1%, +16 koz), despite including the benefit of the final tranche of 2020’s semi-finished stock and after allowing for improved operational stability.
Automotive demand set to grow 14% in 2021, and a further 20% in 2022, despite semiconductor chip shortages
Due to the record lead-times in receiving semiconductor chips, automotive manufacturers dramatically revised their production forecasts downwards in Q3’21. Passenger car production is now forecast to be 77m, a mere 3% up on pandemic-impacted 2020, and around 10m fewer vehicles than originally forecast at the start of 2021.
Even in this context, however, automotive platinum demand is expected to grow by 14% (+340 koz) in 2021, supported by both higher platinum loadings in autocatalysts to meet tightening emissions legislation and the substitution of platinum for palladium, which is estimated to be just over 200 koz this year. These trends are set to continue into 2022 when automotive demand is forecast to increase 20% (+533 koz) despite vehicle growth of only 10% to 85m, well down from the original forecast of 93m.
Standout automotive demand increases in 2021 are forecast in North America, which will jump by 31% (+92 koz) driven by significant growth in hybrid and mild hybrid vehicle production, and a strategic focus from producers on SUVs and pick-up trucks over smaller vehicles; and in China where demand will grow by 42% (+118 koz) supported by the implementation of China 6a along with the phase-in of China VIa for heavy-duty vehicles. Platinum substitution for palladium in both regions is also a contributor to these significant gains.
ETF and exchange stock demand falls, while bar and coin demand grows
Investment demand was -246 koz in Q3’21, as exchange warehouse stocks declined by 173 koz and ETF holdings contracted by 195 koz. As seen in the previous quarter, the contraction in ETF holdings was driven by South African funds rotating to platinum mining equities to benefit from healthy dividend yields. Meanwhile, elevated lease rates during the quarter, probably due to strong imports into China, encouraged outflows from NYMEX depositories, which had declined to 541 koz by the end of Q3’21. Global ETF holdings are forecast to contract by 40 koz this year but rise by 50 koz in 2022.
Demand for bar and coin jumped 25% (+24 koz) in Q3’21 to 122 koz, reflecting investor concerns that global risk – including inflation – remains high. Bar and coin investment is expected to reach a robust 365 koz in 2021, albeit at a 38% decline on 2020’s extremely high level. Demand in 2022 is expected to rise by 10% to 402 koz, driven predominantly by increased retail investor buying in North America and Japan. While this forecast of 402 koz is below the record of 586 koz in 2020, it is still over 50% higher than the annual average bar and coin demand for the seven years prior to the pandemic.
Industrial demand expected to surge 26% in 2021 with 2022 to be above 2019 level
Industrial demand in Q3’21 was 20% higher (+98 koz) year-on-year, and despite some slowing expected in the final quarter, full-year demand is expected to increase by 26% (+514 koz) on 2020. This growth is driven by expected surges in petroleum demand of 65% (+71 koz) as economic activity continues to improve, and glass demand of 72% (+303 koz), from new fibreglass and LCD tank capacity installations in China.
While petroleum capacity additions in 2022 will increase platinum demand, platinum’s use in glass fabrication will be over 50% lower as the significant capacity expansions in 2020 and 2021 are not repeated, as to be expected following large scale capacity additions. Despite this dramatic reduction, platinum industrial demand overall will remain above the 2019 level.