Ceteris Paribus: Platinum in short supply next year


THE platinum market is expected to be in a deficit in 2023, according to the World Platinum Investment Council (WPIC). This is owing to a growth in demand for the metal, which is projected to be stronger than its anticipated supply for the 2023 fiscal year.

2023 projection

The latest WPIC report forecasts a platinum deficit of 303 000 ounces (oz) in 2023. This is on the back of an increase in global platinum demand, which is expected to strengthen by 19% (to 7 770koz) vis-a-vis an anticipated increase in supply of just 2% (to 7 466koz).

“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,” reads the report.

2022 FY forecast revision

The report also highlighted a downward revision of the 2022 full-year (FY) forecast: “Supply constraints, combined with increased bar and coin demand, have seen the market surplus forecast for 2022 revised downwards by 17% (-170koz) to 804koz ... Operational challenges meant refined platinum production declined 11% (-171koz) year-on-year in Q3 2022.”

Feeding the trend; are maintenance and power supply challenges in South Africa — supplier of over 70% of mined supply which resulted in a 18% decline during the quarter.

2022 Q3 outturn

Stats collated  by WPIC show automotive platinum demand jumped 25% year-on-year in Q3 2022 versus a weak outturn in the comparative 2021 period steered to a greater extent by a 27% increase in light-duty vehicle production as supply-chain challenges eased. According to the report: “A combination of higher passenger vehicle production numbers, tighter emissions legislation for HDVs in China and India, as well as growing substitution of platinum for palladium will see a 12% (+329koz) expected increase in platinum demand this year, to 2 964koz.”

With growing clamours for reduced carbon emissions buttressed by the COP 27 global summit on climate change; there is an ever increasing demand for the metal by automakers. This is because platinum is a key ingredient in catalytic convertors which significantly cut on carbon emissions.

In the quarter, jewellery demand edged slightly lower to 482koz (down 1% year-on- year, -3koz). Jewelley demand is expected to sail stable in 2023. Industrial demand improved by 2% year-on-year, although it is forecast to decline by 14% for the full year of 2022. The year 2023 is forecast to be the second strongest year for industrial demand on record, climbing 10% to 2 316koz, with a notable increase in demand from the glass industry.

What this means for Zim

Zimbabwe’s platinum revenues are still a far cry from the US$3 billion platinum target for 2023. Two key factors are important to this matrix: the price of the metal and the national annual production. The production has not changed much against the yesteryears while the prices of platinum have steadily firmed in recent years. There remains a need for greater investment in the sector to ramp up PGMs production in Zimbabwe.

Platinum production in Zimbabwe declined 1% to 241 000oz in the first six months of 2022 from 243 000oz in the comparative period of 2021. Moreover, Zimbabwe is projected to register an annual decline of 4% to 465 000oz for 2022, from the 2021 outturn — just 1,5% above 2019’s output.

Persistent power cuts could come in the way of the country's platinum output. However, Zimbabwe stands to benefit from firming commodity prices. Despite major market shifts, platinum has managed to hold critical long-term support at around US$800 an ounce (closing at US$996 on Monday December 5) with solid demand expected to provide some support for the precious metal going forward.

Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — [email protected]

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