Supply constraints, combined with increased bar and coin demand, have seen the market surplus forecast for 2022 revised downwards by 17% (-170 Koz) to 804 Koz. The profound swing in market balances between the 2022 surplus and the 2023 deficit is forecast to be more than 1.1 Moz.
Additionally, extreme import volumes into China continued throughout the third quarter, contributing to ongoing physical market tightness despite the global surplus. Similar to previous quarters this year, these imports were significantly above identified demand in China and were met largely by sizeable flows from platinum ETFs and exchange stocks. Year to date, these excess imports into China, which are not captured in published supply and demand data, are already 1.2 Moz – far in excess of the forecast 2022 surplus.
Total supply is now forecast to decline 10% in 2022 and is expected to remain weakened.
Considerable headwinds have resulted in another downward revision to the original forecast for total platinum supply for 2022, which is now expected to decline by 10% year-on-year. Operational challenges meant refined platinum production declined 11% (-171 Koz) year-on-year in Q3’22. Maintenance and power supply challenges in South Africa – supplier of over 70% of mined supply – resulted in an 18% decline during the quarter. Global mine supply in 2022 is forecast to contract by 9% (-567 Koz) year-on-year to 5,637 Koz – some 7% lower than pre-pandemic 2019 levels. Disruption will likely remain a feature in 2023, with the forecast up a modest 2% (+89 Koz) year-on-year to 5,726 Koz.
Global recycling struggled in Q3’22, declining to its lowest level since the pandemic-affected Q2’20, primarily as the limited supply of end-of-life vehicles reduced spent autocatalyst supply. Global recycling is expected to expand by 4% in 2023 as new vehicle production strengthens, thereby increasing scrap autocatalyst supply.
Automotive demand growth trajectory set to continue into 2023
Automotive platinum demand jumped 25% year-on-year (+143 Koz) in Q3’22 on a very weak Q3’21, primarily driven by a 27% increase in light-duty vehicle production as supply-chain challenges eased. A combination of higher passenger vehicle production numbers, tighter emissions legislation for HDVs in China and India, and growing substitution of platinum for palladium will see a 12% (+329 Koz) expected increase in platinum demand this year, to 2,964 Koz. Platinum substitution for palladium is estimated to reach 340 Koz in 2022 and just over 500 Koz next year – more than double the figure in 2021 (240 Koz). Automotive demand in 2023 is expected to increase at a similar rate to 2022, up 11% (+324 Koz) to 3,288 Koz.
Jewellery demand remains constant
In Q3’22, jewellery demand edged slightly lower against Q3’21 to 482 Koz (down 1% year-on-year, -3 Koz). Jewellery demand in 2022 is now forecast to remain the same year-on-year at 1,953 Koz, with growth in Europe, North America, India and Japan not fully countering weakness in China, yet an improvement on the demand projected at the beginning of the year. For 2023, demand is expected to remain flat at 1,954 Koz.
Industrial demand set to increase 10% in 2023
Industrial demand improved by 2% year-on-year (+10 Koz) in Q3’22. However, it is forecast to decline by 14% (-341 Koz) in 2022 versus record levels of demand in 2021 as a result of fewer capacity additions this year. Nevertheless, 2022 is set to be the third strongest year for platinum industrial demand on record, with 2,110 Koz of demand.
This trend is set to continue into 2023, which is forecast to be the second strongest year for industrial demand on record, climbing 10% to 2,316 Koz, with a notable increase in demand from the glass industry. Driven by anticipated growth in capacity expansions, ongoing strong demand in China, and fibreglass plant projects in Egypt, glass demand is expected to jump by 52% to 481 Koz. Other increases are expected in the chemical (+6%, +39 Koz) and medical sectors (+3%, +7 Koz).
Investment demand is to increase significantly in 2023, as bar and coin demand jumps 49%
Bar and coin investment in Q3’22 declined 12% year-on-year yet improved 29% on the previous quarter, as net selling in Japan reversed. Whilst bar and coin demand continue to be robust, it could not offset further outflows of exchange warehouse stocks (-134 Koz), combined with ETF liquidations (-235 Koz), resulting in net disinvestment for Q3’22 of 272 Koz. Bar and coin demand is forecast to rise by 2% (+8 Koz) this year to 340 Koz, which again will not offset outflows from exchanges (-315 Koz) and ETF liquidations (-550 Koz), bringing net disinvestment to 525 Koz for the year.
Next year, platinum bar and coin demand is forecast to jump by 49% (+167 Koz) to 507 Koz, a three-year high, as manufacturers in North America and Europe allocate more capacity to platinum on weaker gold and silver demand and net disinvestment in Japan swings to net investment. Meanwhile, outflows from exchange warehouses (-20 Koz) and liquidations of ETF holdings (-275 Koz) are expected to slow, resulting in a net investment of 212 Koz in 2023.
Trevor Raymond, CEO of the World Platinum Investment Council, commented:
“The considerable economic headwinds that have persisted throughout 2022 are expected to continue into 2023, yet the platinum market is forecast to be in deficit after two consecutive years of significant surpluses. This reflects supply that remains well below pre-pandemic 2019 levels and demand growth, despite the unfavourable economic outlook. Platinum’s resilience reflects growing automotive demand mainly due to increased substitution, higher loadings, and already committed industrial capacity additions. This puts platinum in a somewhat unique position versus other commodities in that demand is forecast to continue to grow, despite the recessionary outlook.
“Overlaying the 2023 deficit are the massive platinum imports into China over identified demand, which have been ongoing since early 2021 and now stand at 2.5 Moz. These do not reflect in our published demand data. These excess imports, whether used or held as inventory, exceed the 2021 and 2022 global surpluses combined and will not be available to re-enter Western markets to address the deficit in 2023 due to domestic export controls. This could lead to further tightening of the platinum market next year.
“Moreover, the recent COP27 has highlighted that the need to decarbonize is more acute than ever. Green hydrogen produced by platinum-containing electrolyzers and used to displace natural gas or as an energy source in fuel cell electric vehicles have a significant role to play in the energy transition. While hydrogen-related platinum demand is relatively small in 2023 – of more relevance in a tight market – it is expected to grow substantially in the medium term, offering an option to investors looking for exposure in this area and further strengthening the investment case for platinum-based on future demand growth.”
