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Platinum market forecast to remain in balance during 2017

London, 6 September 2017

  • Evidence of continued supply constraints in Q2 2017
  • Automotive demand for FY 2017 estimated at 2014 level
  • Sixth consecutive quarter of positive investment demand

“Today’s report once again highlights the complexity of the platinum market and the many different underlying dynamics at work, all of which add up to a market largely in balance. Supply clearly remains constrained, with the longer-term effects of reduced capital expenditure and above inflation increases in operating costs beginning to bite in some areas.

Platinum demand, while lacklustre overall, is less clear-cut than one might think. Autocatalyst demand for platinum remains robust, defying the expectations of some, with overall demand levels for this year expected to be roughly the same as in 2014. It is pleasing to see that the debate around emissions is becoming grounded in fact, which I firmly believe will show investors the role automotive use of platinum will play in future demand growth. We look forward to shining a light on the extent to which automakers are increasing platinum loadings in their new models and fleets in coming quarters.

Finally, it is noteworthy that investment demand, should it continue at the same rate in the second half of 2017 as it did in the first, will likely be higher than initially expected. Today’s report highlights the direct impact the WPIC’s market development efforts are having too, with an increasing number of investors using BullionVault’s service to add to their vaulted platinum bar holdings. We look forward to providing further updates on our exciting market development partnerships (projects) in the autumn.”

Paul Wilson, chief executive officer of WPIC

The World Platinum Investment Council (WPIC) today announces the publication of its latest Platinum Quarterly - the first independent, freely-available, quarterly analysis of the global platinum market. This report incorporates analysis of platinum supply and demand for the full year and the second quarter of 2017, with the market expected to be broadly in balance, albeit with a small 15 koz deficit predicted.

Today’s report highlights that overall supply is expected to contract further in 2017, due to closures of uneconomic mining at current market prices, with total platinum supply expected to decrease by 2% year-on-year to 7,795 koz. Secondary supply is forecast to slip by 3% when compared to 2016, with a reduction in jewellery recycling outweighing increased autocatalyst recycling.

On the demand side of the equation, conditions remain lacklustre. Nevertheless, it is encouraging to observe the continued resilience of platinum demand from the automotive sector, which is counter to many negative commentaries on the sector. The full-year forecast for the segment is 3,360 koz, down just 2% on 2016 (3,435 koz) and very close to overall automotive demand in 2015 and 2014, despite a further reduction in diesel market share in Western Europe.

The report shows that while diesel share in Europe continues to erode in the smaller and mid-sized vehicle segments, it remains robust and as high as ~80% in the larger, luxury and MPV (multi-purpose vehicle) segments. Application of mild hybrid technology can also re-assert diesel’s efficiency advantages over its gasoline counterparts, particularly with respect to CO2 emissions. An example of a diesel mild hybrid is Audi’s SQ7.

Global platinum jewellery consumption is estimated to fall 1% to 2,590 koz in 2017, however, this masks significant changes in demand by country. The decline in demand from China this quarter was largely offset by increases in other regions, particularly in India and the U.S.

Today’s data reaffirms the strong prospects for the Indian jewellery market, reflecting published data from Platinum Guild International (PGI), which recently reported that sales had accelerated by 48% year-on-year in Q2’17.

Global investment demand came in at 90 koz in Q2’17, with bars and coins and exchange-traded funds (ETFs) seeing gains, while exchange stocks remain unchanged. This marks the sixth consecutive quarter of positive investment demand. Today’s data indicates that overall investment growth in 2017 is likely to be greater than expected, should the rate of growth observed in the first half of the year continue over the next two quarters.

Overall, industrial demand data was weak during the second quarter, down 65 koz to 400 koz. This fall was prompted by the timing of plant consolidation in petroleum refining. The report shows, however, that there was an increase in platinum demand for use in medical devices.

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