The World Platinum Investment Council has revised its 2019 forecast for the platinum market, now expecting to see a deficit of 30,000 ounces compared to the prior estimate of a surplus of 345,000 ounces.
The council said Nov. 21 in its third-quarter platinum report that the total demand for platinum in 2019 is expected to be 12% higher than in 2018 as a result of exchange-traded fund buying, which will offset decreases in demand in the automotive, jewelry and industrial sectors. Total supply for the year, meanwhile, is expected to increase by only 2% over 2018, with increases in both mining supply and recycling.
For the third quarter, total supply was down 8% and total demand was up 7% year over year. A mining supply decline by 11%, primarily due to smelter maintenance in South Africa, more than offset a 2% increase in recycle supply and the higher demand.
WPIC CEO Paul Wilson said in a statement that investment demand performance is the highlight of 2019. "The particularly strong investment demand in the first half of 2019 continued in [the third quarter] and into [the fourth quarter] with the increase in ETF holdings of [1 million ounces], the highest seen since physically backed platinum ETFs were launched in 2007," he said, as interest in platinum investment has become more widespread.
Looking to 2020, Wilson said investment demand remains strong but is well below the record level in 2019, and despite a fall in mining supply will still result in a sizable surplus in the next year. The WPIC expects reduced investor interest to lead to a 670,000-ounce surplus in 2020.
Next year would see a 1% decrease in supply and a 10% decrease in demand, with mine supply expected to be 2% lower than in 2018. The expected fall in demand from the automotive sector, however, does not take into consideration possible platinum for palladium substitution.
Matthew Piggott, head of metals and mining research at S&P Global Market Intelligence, expressed concern that a drop in investment would see lower platinum prices in 2020.
"The WPIC report makes for sobering reading on the underlying fundamentals of platinum. 2019 saw record levels of ETF investment, and the market projection of a small deficit is wholly dependent on this," said Piggott.
"Overall, we’d need another year of substantial investment interest in 2020 just to keep platinum prices propped up. Shrinking usage in autocatalyst demand and weak industrial usage numbers will continue to place prices under pressure, despite a small pullback in supply," he added.
"Despite some of the positive potential drivers, such as price driven substitution — the timing of which would be a problem — the scale of the projected surplus means we struggle to see a positive case for platinum pricing due to these weak fundamentals, unless we see significant further investor support to soak up metal," according to Piggott.