According to the World Platinum Investment Council (WPIC), the projected global platinum deficit in 2023 will be significantly larger than previously anticipated, with a 77% increase. The primary factors contributing to this situation are supply constraints and heightened demand, as stated in the WPIC’s latest quarterly report released on Monday.
The WPIC predicts a substantial growth in platinum demand, which is expected to rise by 28% to reach 8.2 million troy ounces in 2023. Platinum finds extensive application in various sectors, including vehicle exhaust systems, industrial processes, and jewelry production.
The upsurge in demand can be attributed to the automotive industry’s increased use of platinum in each vehicle and the substitution of palladium with more cost-effective platinum by automobile manufacturers, as both metals effectively reduce harmful engine emissions.
Moreover, industrial demand for platinum is anticipated to reach record levels, primarily driven by China’s expansion of glassmaking facilities, which heavily rely on platinum.
Conversely, the global supply of platinum is predicted to decline by 1% to 7.2 million ounces, primarily due to electricity shortages experienced by major producer South Africa.
This decrease in supply leaves the market undersupplied by 983,000 ounces, a significant deviation from the WPIC’s projection just two months ago, which estimated a deficit of 556,000 troy ounces for the current year.
To address this shortfall, the WPIC suggests that the market will need to rely on above-ground stocks. However, the accessibility of these stocks at current prices remains uncertain, particularly considering a substantial portion of above-ground platinum stocks appear to be held in China.
The WPIC highlights that the platinum market already experienced an undersupply in the first quarter of 2023, marking the first quarterly deficit since the second quarter of 2021.
During this period, demand surged by 28% as investors sought to purchase platinum bars and coins as a safe haven investment amid global economic uncertainty. Additionally, some investors speculated that deficits would drive platinum prices higher, further driving demand.
Overall, the WPIC report underscores the escalating deficit in the platinum market, necessitating close attention from stakeholders and highlighting potential implications for various industries reliant on this precious metal.
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