Platinum Market Set for Further Deficits as Demand Continues to Rise
Summary
Platinum is forecast to be in a market deficit of 418,000 ounces in 2024, as mine supplies are stretched and recycling declines.
The platinum market is likely to post another year of deficits in 2024, as mine supplies are stretched and recycling declines.
The precious metal is forecast to be in a market deficit of 418,000 ounces in 2024—from prior expectations of 353,000 ounces—amid strained supply from the mining sector and declining recycling rates, according to a new report from the World Platinum Investment Council.
“The key takeaway is that this is the second year of material deficits in a row," Edward Sterck, director of research at WPIC, said in a call.
Mine supply is expected to be 3% lower on year, with refined production expected at 5.49 million ounces for 2024. Recycling rates slumped 14% on year in 2023, due to a shortage of end-of-life vehicles as cash-squeezed consumers drive vehicles for longer.
This follows a tough year for the platinum sector. Despite the deficits, prices have struggled in 2024, with futures down 12% in the year-to-date. Much of this has been due to low demand as the automotive sector broadly destocks, having built up their inventories through contractual commitments during the pandemic, as well as demand from China being highly price-sensitive. The metal is used in the catalytic converters fitted to combustion-engine vehicles, to remove some pollutants from exhaust fumes.
South African platinum miners have looked to cut costs on the back of lower revenue from mining, as platinum group metal prices slump.
“PGM basket prices have continued to dramatically decline since we published our last estimates," Sterck said. The basket price is an amalgamated average price of a group of precious metals including platinum, palladium, rhodium and gold used by producers to indicate what prices are for their commodities.
Sibanye-Stillwater’s 2023 results, disclosed Tuesday, showed it booked a $2.58 billion impairment on the significant decline in prices. In February, Anglo American Platinum said it would cut around 3,700 jobs in a restructure to keep costs down while Impala Platinum said in its results that it would cut capital expenditure.
That said, Sibanye said it was starting to see signs of support for a better demand outlook for platinum group metals. Sterck agreed, adding that automotive oversupply has largely run its course.
Overall, WPIC said it is expecting total supply to fall in 2024 by 1% to 7.09 million ounces. This slip is largely expected to be driven by lower mine supply, weighed down by restructuring plans, closures and slower-than-expected production ramp-ups in South Africa, and Russian planned smelter maintenance.
Meanwhile, demand is forecast to slip by 6% in 2024 to 7.51 million ounces, though this remains above the five-year average. Growth in automotive and jewelry markets is likely to be offset by weaker investment and particularly industrial demand, according to the WPIC. Industrial demand hit a record in 2023, rising 12% on year to 2.62 million ounces, though this is expected to pull back to 2.26 million ounces in 2024.
“There are strong underlying fundamentals in the market," Sterck said. “They just haven’t flowed through to the price, yet."
Write to Joseph Hoppe at joseph.hoppe@wsj.com
