September 6, 2019 / 5:02 AM / a month ago

Rampant investor demand eats into platinum oversupply - WPIC

    By Peter Hobson
    LONDON, Sept 6 (Reuters) - Resurgent investor demand for
platinum will drive overall consumption of the metal up 9% this
year and lead to a lower surplus, the World Platinum Investment
Council (WPIC) said on Friday.
    The WPIC in its latest quarterly report cut its estimate of
oversupply in the roughly 8 million ounce a year platinum market
to 345,000 ounces from 375,000 ounces three months
ago.
    Clamour for the metal from investors in exchange-traded
funds (ETFs) will offset declines in consumption by jewellers
and auto makers, the WPIC said. 
    "Unprecedented investment demand in H1'19 of 855,000 ounces
(720,000 ounces from increased ETF holdings and 135,000 ounces
from bar and coin purchases) supports a conservative investment
demand forecast for 2019 of 905,000 ounces," it said.
    The WPIC is a platinum industry-funded body and uses data
from an independent consultancy. 
    Platinum prices plunged from around $1,800 an ounce
in 2011 to a low of $751.25 last year as declining demand pushed
the market into surplus in 2017 and 2018, according to the WPIC.
    But prices have since crept higher, with rapid gains since
late August taking the metal to near $1,000. 
    The biggest consumer of platinum is the auto industry, which
uses it and sister metals palladium and rhodium in vehicle
exhausts to reduce harmful emissions. 
    Demand is likely to improve as a decline in sales of diesel
cars, which use the most platinum, begins to reverse as more of
them meet tougher environmental rules and lower interest rates
lift precious metals in general, said the WPIC's head of
research, Trevor Raymond.
    He also said a sharp rise in palladium prices, currently
around $1,600 an ounce, would encourage auto makers to use more
platinum, though there is so far no evidence of this happening. 
    "Demand growth potential over the next two years certainly
looks like the market is heading to deficit," Raymond said. 
    Platinum supply will rise 4% this year, the WPIC said,
mainly due to the release of stocks accumulated by miners in
South Africa, the largest producer, during smelter repairs and
maintenance in 2018. 
    But this is a one-off boost, Raymond said, predicting South
African output would be around 200,000 ounces lower next year. 
        
  PLATINUM SUPPLY/DEMAND ('000 oz)*       
                  2019(f)             2018  % change
 Mine supply            6,405        6,125           5%
 Recycling              1,985        1,935           3%
 TOTAL SUPPLY           8,390        8,060           4%
                                                       
 Automotive             3,015        3,125          -4%
 demand                                     
 Jewellery              2,215        2,325          -5%
 demand                                     
 Industrial             1,910        1,920          -1%
 demand                                     
 Investment               905           15             
 TOTAL DEMAND           8,045        7,385           9%
                                                       
 Balance                  345          675         -49%
 Above-ground           3,335        2,990          12%
 stocks                                     
    
                  Q2 2019      Q2 2018      % change
 Mine supply            1,615        1,650          -2%
 Recycling                495          485           2%
 TOTAL SUPPLY           2,110        2,135          -1%
                                                       
 Automotive               765          815          -6%
 demand                                     
 Jewellery                555          585          -5%
 demand                                     
 Industrial               480          475           1%
 demand                                     
 Investment                90          -55             
 TOTAL DEMAND           1,890        1,820           4%
                                                       
 Balance                  220          315         -30%
   * Source: World Platinum Investment Council, Platinum
Quarterly Q2 2019
        

 (Reporting by Peter Hobson; editing by David Evans)
  
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