JOHANNESBURG (miningweekly.com) – Total global supply of platinum-group metals (PGMs) is forecast to decline by 2% to 7.7-million ounces in 2017 from 7.8-million ounces in 2016, mainly as a result of a decline in secondary supply as jewellery recycling in China returns to a more typical level after retailer destocking raised it in 2016.

This is according to the World Platinum Investment Council’s (WPIC’s) latest Platinum Quarterly, prepared by SFA Oxford for the WPIC, which was released on Tuesday.

The report predicts that global demand will also decline by 2% to 7.8-million ounces in 2017 from eight-million ounces in 2016, as lower automotive, industrial and investment demand outweigh an increase in jewellery consumption, leaving the market with a deficit of 100 000 oz.

WPIC research director Trevor Raymond told Mining Weekly Online that global refined production is, however, forecast to increase by 2% to six-million ounces in 2017 from 5.9-million ounces in 2016.

He pointed out that, with the exception of Zimbabwe, all PGM-producing regions were expected to sustain or increase production levels next year. Raymond remarked that the processing of a one-off concentrate backlog for Zimbabwe earlier this year, following a smelter outage in 2015, would result in a 6% reduction in refined supply in 2017 to 445 000 oz, compared with the 475 000 oz Zimbabwe produced in 2016.

South African supply is forecast to increase by 2% to 4.3-million ounces in 2017 from 4.2-million ounces in 2016, owing to the ramp-up of two new mines and two replacement shafts, plus restoration of output from shafts temporarily closed in 2016.

Further, the report states that production from Russia is predicted to increase by 10% to 740 000 oz in 2017 from 675 000 oz in 2016. This follows “a temporary dip” in 2016, owing to the reorganisation of processing facilities which was carried out.

Raymond commented that supply from all other regions was predicted to hold steady at 585 000 oz in 2017, while a net increase in refined inventory of 70 000 oz is expected to lift producer stock levels toward typical ranges.

The report outlines that secondary supply of platinum is forecast to decline 6% year-on-year to 1.7-million ounces in 2017 from 1.8-million in 2016. Recycled platinum from autocatalysts is forecast to be little changed at 1.2-million ounces in 2017.

However, the report states that while the environment for recyclers is likely to remain difficult and scrap vehicle volumes in 2017 are expected to be slightly lower than 2016, loadings in recovered autocatalysts are projected to increase, which will result in essentially flat autocatalyst recycling.

Global jewellery recycling is projected to decline by 19% to 505 000 oz from 625 000 oz in 2016, as recycling in China is set to return to a more typical level.

DEMAND DRIVERS
Raymond highlighted that global automotive platinum demand was forecast to decline by 1% to 3.36-million ounces in 2017 from 3.39-million in 2016. He also pointed out that Western Europe remained the largest autocatalyst market for platinum, but demand had declined by 3% in 2016 as diesel vehicle market shares shrunk steadily and the platinum content of diesel aftertreatment systems reduced owing to changes in catalyst technology.

“Automakers vary in their strategies, but some do continue to rely on increasingly efficient diesel powertrains to meet their carbon dioxide emissions obligations,” Raymond explained. Additionally, he noted that diesel’s share of passenger car powertrains was expected to continue its steady decline to 48.5% in 2017.

The report highlights that the US automotive market appears to be near a sales plateau, though remaining near the historical high. Despite events in 2015, several automakers have plans to release new diesel light vehicles for the US market in 2017, which demonstrates that automakers are already able to meet the stringent US emissions standards with a diesel engine.

However, countries such as India are forecast to increase demand which is anticipated to offset Western Europe’s demand decline. Indian demand assumes a resilient diesel share, but there are risks around air quality perceptions and the added cost of after-treatment.

Further, the report highlights that countries such as South Korea and Thailand play an increasingly important part in sustaining platinum autocatalyst demand, driven by their tightening emissions legislation and rising vehicle numbers.

Meanwhile, the report states that jewellery demand is forecast to increase by 2% to 2.6-million ounces in 2017 from 2.5-million ounces in 2016. Indian demand is expected to increase by 16% in 2017, as India-based platinum jewellery producer Evara’s campaign should continue to drive platinum jewellery sales, whereas consumption in Japan and China is projected to decrease slightly.

The report adds that the price differential to gold should continue to support demand in the US and Europe.

Meanwhile, lower requirements for use in petroleum refining, chemical catalysis and glass fabrication are estimated to weaken industrial demand by 6% to 1.6-million ounces in 2017 from 1.7-million ounces in 2016.

Raymond noted that the delays to oil refinery consolidation and closures in Japan should result in a greater proportion of the anticipated capacity cuts occurring in 2017, returning platinum to market, while buying by Chinese on-purpose propylene producers should ease as fewer new propane dehydrogenation plants are scheduled to start up in the country next year.

Elsewhere in the world, the continued decline in hard disk drive requirements is expected to reduce electrical demand. This should be offset by gradual growth in the fuel cell industry in 2017.

ABOVE-GROUND STOCKS
Raymond pointed out that the WPIC had forecast a market deficit of 170 000 oz in 2016, with above-ground stocks estimated at 2.1-million ounces at the end of 2016. With the forecast 100 000 oz deficit for 2017, above-ground stocks are projected to reduce by 5% to two-million ounces.

The WPIC’s definition of above-ground stocks is the year-end estimate of the cumulative platinum holdings not associated with exchange-traded funds, and metal held by exchanges or working inventories of mining producers, refiners, fabricators or end-users.

TRUMP EFFECT?
It is uncertain what impact the surprise election of US President-elect Donald Trump will have on the PGM market. However, Raymond pointed out to Mining Weekly Online that, ahead of the election, PGM prices rose slightly.

“Trump has, since his victory, indicated that he intends to embark on a number of substantial infrastructure development projects during his term. This has resulted in an increase in copper prices and substantial decline in the platinum and gold prices.”

Raymond explained that this was because platinum and gold are strongly linked. Nonetheless, he highlighted that platinum is also an industrial metal and if there is an infrastructure and vehicle manufacturing boom this will require more platinum, which could increase the metal’s value.