WPIC: Global Platinum Surplus To Shrink To 180,000 Oz. In 2018
(Kitco News)- The annual supply surplus in the platinum market shouldshrink in 2018 as demand rises but South African mine production shrinks, saidthe World Platinum Investment Council Monday.
The organization released its quarterly report on marketsupply/demand fundamentals at the start of Platinum Week in London.
The WPIC said it looks for the supply surplus to fall to180,000 ounces this year from the revised 315,000 in 2017.
“Ultimately, we believe platinum supply remainsconstrained,” the report said. “Producers are contending with reducing theircosts to offset increased labor costs driven up by more than inflation.Moreover, utilities and consumables, coupled with a low platinum price and thestrong rand, continue to put severe pressure on margins and capital expenditure.”
In the first quarter, the market was in deficit by 125,000ounces, the organization said. The WPIC said South African mine supply fell inthe first quarter to its lowest level since 2016 at 985,000 ounces.
However, the forecast South African mine supply - somethree-quarters of the world’s mine output - has been revised up to 4.36 millionounces for full-year 2018. Still, total global mine supply is seen falling to 6million ounces from 6.15 million last year. When including recycling, totalglobal supply is forecast to fall to 8 million ounces from 8.08 million.
Meanwhile, global demand is forecast to be marginally higherfor the year, despite a fall in total automotive demand, in particular for diesel-powered vehicles thatrequire the metal for catalytic converters, the WPIC said. All forms of demandare seen rising to 7.8 million ounces from 7.77 million.
Use of platinum for autos is seen easing 3% to 3.3 millionounces. However, other industrial demand and jewelry-related consumption are forecastto rise.
The consumption of the metal for jewelry purposes is seenrising by 2% to 2.51 million ounces in 2018, with the WPIC saying that this willbe driven global economic growth, along with continued demand from India aslarger retailers with multiple stores gain market share from the independentsector. Demand from China is predicted to increase amid a campaign to targetmillennials.
Excluding autos, industrial demand is seen rising by 0.6% to1.75 million ounces. The WPIC said this should be helped by the petroleum industry,with the recovery in Japan expected to lead to increased use of platinum for refining.
Investment demand was forecast to ease 4% to 250,000 ouncesin 2018.
While diesel car sales are down in the European Union,heavy-duty diesel sales are strong in the rest of the world, the report said.
“U.S. heavy-duty truck orders have responded to risingfreight demand in a confident economy,” said the WPIC report. “U.S. sales ofDaimler trucks, for instance, are up 21%. In China, increased sales werebolstered by higher platinum loadings to meet tightening emissions legislation.Environmentally driven fleet renewal in India is now also under way.”
Additionally, the WPIC report said, U.S. automakers havemade an increasing number of announcements about meeting environmentalstandards in order to avoid fines - all pointing toward more usage of platinum.
“Today’s report shows resilient demand for platinum, whichwill rise modestly this year when compared to 2017,” said Paul Wilson, chiefexecutive officer of WPIC. “We are still convinced that supply remainsconstrained. The year will be in surplus overall, albeit it at lower level than2017.”
He later added: “The opportunity for the global platinummarket to grow remains undiminished. I have been personally encouraged byrecent activities in China, where a number of new WPIC product partnerships,clearly focused on retail investors, are in the pipeline.”
By Allen SykoraFor Kitco News
Follow @AllenSykora
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