The World Platinum Investment Council (WPIC) today published its Platinum Quarterly for the fourth quarter of 2020, which also includes a revised forecast for 2021.
For the third consecutive quarter, platinum posted a deficit in Q4 2020 of -170 koz, as strong demand in automotive, industrial and jewellery sectors and sustained strong investment demand for platinum outstripped constrained supply.
Overall, despite a year that saw the global economy contracting by 3.5%, the platinum market deficit in 2020 was -932 koz, the largest on record. While total demand dropped by 7% (-569 koz), the sharp decline in mining supply of 20% (-1,203 koz) and the fall in recycling of 10% (- 210 koz) contributed to total supply being down 17% (-1,413 koz).
Against a backdrop of widespread vaccine programmes seeing economies return towards normal activity, platinum demand is forecast to increase by 3% (+254 koz) to 7,992 koz, while supply will recover 17% (+1,126 koz) to 7,932 koz resulting in a deficit of -60 koz in 2021, the third consecutive annual deficit. The demand growth in 2021 is expected to be driven predominantly by strong recoveries in automotive, jewellery and industrial demand, offsetting reduced yet very strong investment demand.
Resurgent automotive sector
Platinum automotive demand in Q4’20 grew 5% (+31 koz) year-on-year due to a healthy recovery in light-duty and heavy-duty vehicle production. North America in particular saw platinum demand increase 17% (+13 koz), including strong growth in light-duty diesel vehicles, helping to offset declines in other parts of the world. Heavy-duty vehicle production meanwhile saw a 7% increase globally, spearheaded by China increasing by 21%. Heavier PGM-loaded catalysts which are needed to fully comply with the fast-approaching China VI legislation, contributed to a 51% (+29 koz) increase in platinum demand from this region.
Light-duty vehicle production is expected to recover in 2021, reaching levels just below those seen in 2019. Despite this slight shortfall, there is expected to be a 25% (+606 koz) increase in automotive platinum demand, mainly due to higher vehicle production, increased loadings to meet tighter emissions regulations and substitution of platinum for palladium in gasoline after-treatment systems.
Platinum investment demand stays high
In Q4’20 investment demand was 63% (+51 koz) higher than Q4’19 despite being 86% (-827 koz) lower than in Q3’20, itself the highest quarterly total on record. Bar and coin net purchases more than doubled year-on-year, growing 112% (+32 koz) while ETF holdings added 74 koz during the quarter, up 56% on the prior year.
Investors continue to be very interested in platinum: its key roles in the hydrogen economy, to produce green hydrogen and its use in fuel cell electric vehicles, the accepted views of significant near-term substitution of platinum for palladium, and the substantial discount to both gold and palladium suggest strong future fundamentals. While platinum investment, in bars and coins as well as ETFs, is expected to remain strong in 2021 – forecast to be above the 5-year average – it may not exceed the exceptional level seen in 2020. Platinum bar and coin demand is forecast to be 15% (-90 koz) lower, but still remain elevated. Overall, global net ETF investment holdings are expected to increase by 250 koz (c.50% below 2020).
Strong recovery underway in jewellery sector
Jewellery fabrication turned positive in Q4’20, up 7% (+32 koz), with notable increases in demand in North America – the first year-on-year quarterly increase in 2020 of 4% (+4 koz) – and in China – the third consecutive year-on-year increase since Q1’17 of 15% (+31 koz).
In 2021, total jewellery demand is expected to increase 13% (+234 koz) above 2020 levels, with improvements in every market as economic life returns and the worst of COVID-19 passes.