May 13, 2019 / 5:03 AM / 11 days ago

PLATINUM WEEK-Platinum surplus for 2019 slashed after jump in investment

    By Eric Onstad
    LONDON, May 13 (Reuters) - A surge in investment demand has
slashed expectations of a large surplus this year in the global
platinum market, the World Platinum Investment Council (WPIC)
said on Monday.    
    In March, a report by the WPIC forecast global oversupply of
680,000 ounces of platinum this year, its largest oversupply
since at least 2013.
    But the industry group, which uses data from an independent
consultancy, said in its latest report that the 2019 surplus was
now forecast at 375,000 ounces. 
    A jump in demand by institutional investors for platinum
ETFs (exchange traded funds) in the first quarter has
dramatically changed the outlook, said Trevor Raymond, director
of research at the WPIC.
    Holdings of physically-backed ETFs climbed by 690,000 ounces
in the first three months of this year, the strongest rise since
the ETFs were launched in 2007.    
    "Investors have been telling us that they would need to see
a combination of factors before they could comfortably act," he
said in an interview.
    "In the first quarter we had the combination of rising
prices, a downside supply risk in South Africa and there were
several demand growth signals, the two most important being more
diesel cars on the road and the potential for platinum to be
used in gasoline vehicles." 
    While the spot platinum price has shed more than 40
percent over the past five years, it has rebounded by nearly 10
percent so far this year.
    It appeared that ETF buyers were long-term investors such as
pension funds, encouraged by stabilisation in the diesel market,
Raymond added.
    While appetite for platinum had soured since Volkswagen's
"dieselgate" scandal in 2015, the proportion of diesel cars in
the key West European auto market has crept up in recent months
after touching a low around 32% late last year, down from about
50% in its prime, Raymond said.
    Emissions-reducing catalytic converters in diesel vehicles
contain more platinum, while sister metal palladium is a larger
component in gasoline engines.
    Total platinum demand in 2019 is expected to rise by 8%
while supply is due to increase by 4%, the report said.
    The first quarter saw a 19% jump in mining supply, mainly
due to the release of metal locked up by smelter repairs and
maintenance in 2018.
    But that is not expected to be repeated next year.
    "Consequently, we expect 2020 refined production to be
significantly below the 2019 level," the report said. 
        
  PLATINUM SUPPLY/DEMAND ('000 oz)*         
                            2019(f)       2018   % change
 Mine supply                  6,375      6,115         4%
 Recycling                    1,995      1,935         3%
 TOTAL SUPPLY                 8,370      8,050         4%
                                                         
 Automotive demand            3,010      3,105        -3%
 Jewellery demand             2,310      2,355        -2%
 Industrial demand            1,890      1,905        -1%
 Investment                     785         15        N/M
 TOTAL DEMAND                 7,995      7,380         8%
                                                         
 Balance                        375        670       -44%
 Above-ground stocks          3,220      2,845        13%
    * Source: World Platinum Investment Council, Platinum
Quarterly Q1 2019
        

 (Reporting by Eric Onstad; editing by Emelia Sithole-Matarise)
  
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