The World Platinum Investment Council predicts a sharp platinum deficit this year and for the indefinite future as demand levels rise across multiple industries and supply constraints cannot meet the required levels. While 2022 resulted in a global platinum surplus of 776,000 ounces, the World Platinum Investment Council predicts a deficit in 2023 of 556,000 ounces. A deficit of this size would mean one thing: high prices equating to excellent investment yields.
“This year’s forecast deficit is unlikely to be a one-off […] with challenges to supply expected to continue and future demand growth, supported by the needs of the hydrogen economy, likely to result in deficits continuing for a number of years,” the World Platinum Investment Council explains.
Essentially, the council doesn’t predict a short-term spike in prices, but sustained, long-term success. If supply can no longer meet demand at a fundamental level, platinum will become an extremely rare and sought-after commodity.
The total platinum supply dropped by 12% year-on-year in 2022 by 7.23 million ounces because of a reduction in recycling and mining output from both South Africa and Russia. The Russia-Ukraine conflict largely contributed to this drop in supply, and as we enter 2023 with tightening geopolitical concerns, this drop in supply will likely persist.
The World Platinum Investment Council believes the supply rates may improve a bit this year, though not enough to balance the approaching demand increases. The forecasted improvement is by just 3% to 7.43 million ounces, though many of 2022’s supply chain issues will remain relevant in the coming year.
To start, South Africa’s mining corporations will likely continue facing electricity complications that reduce output and slow the production process down. Russian mines will also likely encounter sanctions-related operational issues that prevent optimal efficiency. With global inflation rates rising, general supply shortages for common goods surging, and labor shortages continuing, platinum mines will face numerous complex challenges in 2023 and onward.
As the supply dwindles, the World Platinum Investment Council predicts a sharp increase in demand by approximately 24% year-on-year to 7.99 million ounces in 2023. The council believes that each critical platinum demand sector will rise in the coming year, resulting in a comprehensive market boost.
First, the World Platinum Investment Council predicts the automotive industry demand for platinum to rise by 10% to 3.25 million ounces for numerous reasons. To start, platinum is a critical component in hybrid vehicles. Car manufacturers use platinum in catalytic converters to convert toxic pollutants and gasses into less harmful emissions.
As hybrid vehicles and green solutions become more popular on a global scale, so will the need for platinum. In countries like China, with strict emission requirements, platinum catalytic converters may no longer be optional. With heavy-duty vehicles especially, car manufacturers will have to rely on the precious metal to continue making the traditionally high-emission trucks in a more environmentally friendly way.
While the automotive industry’s demand may be a large contributing factor in the nearing demand rise, the industrial demand sector accounts for a larger percentage of its market need. The World Platinum Investment Council predicts that industrial demand for platinum will rise by 12% in 2023 to 2.5 million ounces, the highest recorded demand year. The primary factor behind this rise is Asia’s LDC capacity installations.
Least developed country (LDC) capacity installations in Asia should increase hydrogen-related platinum demand across Asia substantially in the medium term. A few questions hang over China’s platinum imports since 2021 as they do not match the reported demand levels. Because of this unmarked volume, analysts believe we could see sudden, sharp rises in demand coming from the Asia industrial demand sector.
“Whether [China’s high imports] will reflect actual demand — as we are seeing with the glass capacity expansions in 2023 identified in today’s report — or stock held in China, it may not be available to re-enter western markets to address the deficit in 2023 due to domestic export controls, and so will lead to further market tightening,” the World Platinum Investment Council explains.
Another demand sector for platinum is its use case as a palladium substitution. Both precious metals may be used in similar applications, like catalytic converters, though platinum costs substantially less.
The jewelry industry has an expected rise in platinum demand in 2023 of 2% to 1.94 million ounces. The World Platinum Investment Council predicts that investment demand will double in the next year to 450,000 ounces as supply dwindles, prices rise, and the precious metal becomes more appealing.