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Forecast for the commodity platinum is set to soar high this year according to forecasts by several industry experts, with mining of the metal expected to continue to decline for the remaining months of the year.
If that happens, then the platinum market is ending the year at a deficit after it regained balance last year. Over the past five years, demand for the metal has always exceeded its mining plus its scrap recycling. That changed though last year when the demand and mining balanced. The increase in demand so far this year and the projected decline in mining means that the deficit between demand and mining will return this year.
This forecast is shared by independent analysts SFA (Oxford) and other market experts. The SFA projected the growth of platinum in its forecast set it by 2.5%. World Platinum Investment Council projected that the jewelry market will bounce back this year and metals like Gold, Silver, and platinum are already recording increase in demand since the start of the year.
WPIC estimated the market to rise by 9.1% after a tough 2017, largely driven by increasing demand from the petroleum [refining] and glass [making] sectors.” They added that mining, on the other hand, will fall by 1.4%, making it the third time mining has dropped over the past three years. The market supply has been affected ever since the crisis of 2014 when a 5-month strike hit major sites in No.1 producer South Africa.
According to the WPIC, the expected deficit this year will further reduce the availability of Above Ground Stocks of the metal.
The automobile is already leading the other industries in terms of platinum purchase, even though it is expected to drop by 0.9% this year. The next demand is coming from China and India as the jewelry industries continue to grow in those countries. Platinum demand in India is expected to rise by 30% this year while a little decline is expected in the Chinese jewelry market for platinum.
Mining to drop
Mining in South Africa is projected to decline even more this year. Wilson at WPIC stated that “Supply continues to tighten with the long-term effects of falling capital expenditure and recent closures becoming evident.”
There are expectations that the total production of platinum in South Africa will drop below 4 million ounces this year, which signals continues decline in production over the past few years. SFA has estimated that 132 tonnes will be produced in the country this year, which will further decline to 129 tonnes in 2109.
The forecast made by announced by the WPIC is thus as follows:
- Global platinum supply predicted to fall by 2% in 2018
- Industrial and jewelry demand expected to rebound
- Investment demand buoyed by robust ETF buying in 2017
The global platinum supply is forecast to be 7,815 koz in 2018, a decline of 2% from 2017, despite an anticipated increase in recycling of 60 koz to 1,965 koz. Total mining supply for 2018 is expected to decline by 4% to 5,850 koz, mostly owing to reduced output from South Africa following some mine closures in 2017 and lower production in Russia.
Global demand is projected to grow marginally in 2018 to 7,790 koz, as a recovery in industrial demand and an increase in jewelry demand outweigh a decline in automotive demand and slightly lower investment demand.
The CEO of WPIC, Paul Wilson in commenting on its latest prediction stated that “While 2017 was a challenging year for platinum, early indications show signs of a market that is moving in the right direction in 2018. Supply is tightening and demand remains resilient. These promising fundamentals, paired with elevated global uncertainty and a better economic growth outlook, mean macro conditions are becoming increasingly helpful to the platinum market.
The importance of China to platinum is underlined in today’s report. The final quarter of 2017 has shown welcome, albeit tentative, signs that jewelry demand in the country is improving. We expect this trend to continue through 2018, with ongoing strength across other regions.”
He further added that “While concerns about automotive demand weigh negatively on platinum sentiment, we believe that these concerns are, once again, overdone. The policy environment for diesel vehicles remains in flux, especially in Europe.
Nevertheless, our broad perspective, including the environmental need to reduce CO2 emissions, significant hurdles to mass battery electric vehicle adoption, and automakers already able to genuinely clean up diesel NOx emissions, mean we firmly believe clean diesel vehicles will be on the road for years to come.”
The platinum price has been on a decline after it went past the $1,200 mark and is currently trading just below the $900 mark. The commodity markets have been affected by a lot of regional crisis since the start of the year, which has led to the prices of most commodities to record losses.