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WPIC forecasts yet another platinum deficit in 2018

WPIC research director Trevor Raymond

WPIC research director Trevor Raymond

21st November 2017

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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JOHANNESBURG (miningweekly.com) – A global platinum deficit of 275 000 oz is expected in 2018, further reducing the availability of above ground stocks of the metal, which have contributed about 2.5-million ounces in the last year, the World Platinum Investment Council (WPIC) said on Monday.

“[This] represents the sixth year that we will have had a deficit in the global platinum market,” WPIC research director Trevor Raymond told Mining Weekly Online during a telephone interview ahead of Tuesday’s release of the council’s ‘Platinum Quarterly’ report for the third quarter.

He explained that supply seemed constrained this year, and as it started to annualise in 2018, an impact would take place, with the WPIC forecasting mining supply will come down by about 115 000 oz.

In South Africa, output is predicted to fall by 1% to 4.23-milion ounces for this year. A handful of operations in South Africa and Zimbabwe are currently under review for possible closure if they are unable to make a profit.

Supply is thus expected to drop by about 2% in 2018, to 4.15-million ounces, compounded by closures in the second half of 2017.

However, South Africa’s Chamber of Mines has warned that, should parastatal Eskom hike its tariffs by the proposed 19.9%, it could render the local mining industry powerless, with around 66% of all gold and platinum mines being unsustainable, resulting in around 48 000 additional job losses in the country.

“From a supply point of view, it is just looking a little tough to get the metal out of the ground,” said Raymond.

On the demand side, he noted that it was surprising that automotive demand only fell 1% this year, or by around 30 000 oz. “[This] is very surprising, given the massive negative sentiment around diesel[-powered vehicles],” he pointed out.

Although there has also been a recent focus on the electric vehicle market, with hopes that it would further bolster the platinum industry through the use of fuel cells, Raymond lamented that these vehicles’ market share was still only at 1%.

“Tesla needs [to sell] a million vehicles a year to have a successful business. Battery cars just aren’t selling and equally, hybrids aren’t selling. The Prius has been around for 19 years and we don’t all drive them.

“Electric vehicles will have a place, they will grow, but whether it grows from 1% to 10% or 20% over the next ten years, is the debate. In ten years’ time, the assumption is also that either battery will win, or fuel cells will win. All we need, is 6% of the vehicles to be fuel cells and that will use more platinum than what is currently going into autocatalysis,” Raymond pointed out.

Meanwhile, he highlighted that the WPIC’s “real data” showed two positives in the demand for platinum, including a 3% recovery in the global jewellery market in the next year.

“What’s happening here is that China seems to have bottomed, looking to be a flat growth story, [but] India is still growing at double-digits. It’s the first time we’ve seen that in four years,” said Raymond.

He explained that platinum was marketed as a symbol of love in India, which was driving demand.

He added that industrial demand would also increase by 9%, rebounding to what it was in 2016, largely driven by increasing demand from the petroleum and glass sectors.

DO DEFICITS MATTER?
Raymond noted that the industry often argues that even though there were previous large deficits, the platinum price remained the same.

“Do deficits really matter? I think maybe the first or second doesn’t matter, especially when you have metal coming out of vaulted holdings, but after the fifth or sixth deficit – that’s why we are getting a lot more interest from investors around the world saying: ‘This just looks too tight after so many deficits, bring us back up to speed.’

“That is quite encouraging, we are seeing some big institutional buying over the last few months that we haven’t seen for three years,” noted Raymond.

He added that another “odd thing”, is that the market appears fundamentally tighter than it has been for some time, but there are no indications in the market that it is tighter.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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