Processed backlog boosts platinum supply recovery
The World Platinum Investment Council (WPIC) in its Platinum Quarterly for the second quarter of 2021, says “Despite global demand in Q2’21 continuing the positive year-on-year growth trend seen in the previous three quarters, with stand out rises in automotive and industrial segments, the combination of mines operating at 97% of capacity and the faster-than-expected processing of material built up during plant outages in 2020 meant supply outstripped demand, resulting in a surplus for the quarter of 161 koz.”
With recoveries in economic output surprising even the most optimistic growth expectations, platinum demand benefitted and this is expected to continue for the rest of the year. Global platinum demand was up sharply against Q2’20 increasing 23% (+352 koz) year-on-year to 1,907 koz, with 2021 forecast to increase by 1% (+59 koz) over 2020 to 7,753 koz.
Recycle supply has not yet fully recovered to pre-pandemic levels (-13% on Q2’19), but global mine supply was lifted 65% (+615 koz) over Q2’20, bolstered by the processing of a higher-than-expected portion of the backlog created by plant outages in 2020 and a reduction of 34 koz of refined working inventory.
The news that 300 koz of the 500 koz of platinum in semi-finished stock is expected to be processed in 2021, not 200 koz as previously anticipated, means that supply for the year rises by 17% (+1,132 koz) and 2021 is now forecast to be in a surplus of +190 koz.
Despite semiconductor shortages, automotive demand grew 75% Automotive demand jumped 75% (+285 koz) year-on-year in Q2’21 as global light vehicle production recovered from the pandemic. Had it not been for stoppages across the world, as the semiconductor shortage persisted, demand for platinum would have been higher – by an estimated 50 koz.
Automotive platinum demand increased most noticeably in Europe (82%, +127 koz) due to a combination of the implementation of Euro 6d and some platinum for palladium substitution gains, and despite a further fall in the portion of diesel car sales.
So too there were significant rises in North America, where vehicle production surged, lifting platinum demand by 130% (+51 koz). This demand category is expected to rebound strongly this year, up 22% (+529 koz) on 2020 and is also higher than 2019 (+2%, +58 koz). Industrial demand rises 46% and exceeds pre-COVID levels.
The recovery from COVID was particularly evident in the industrial segment which rose 46% (+188 koz) on Q2’20, and 10% (+54 koz) on Q2’19. The use of platinum in industrial applications is expected to increase by 25% (+493 koz) in 2021.
Consumer demand for petroleum as the global economic recovery accelerated saw platinum petroleum demand more than doubling (+22 koz). This trend sees platinum petroleum demand set to rebound by 65% (+71 koz) in 2021.
Meanwhile, platinum demand from chemical in Q2’21 was up 83% (+93 koz) on Q2’20, and from glass up 39% (+31 koz) and similarly, their forecasts for 2021 will increase 14% (+80 koz), and 69% (+268 koz) respectively.
Strong jewellery recovery from weak Q2’20 but hampered by Chinese weakness Jewellery fabrication rose by 19% (+73 koz) in Q2’21, spurred on by strong demand in Europe, up 125% (+36 koz), and North America, up 141% (+65 koz), with improving consumer sentiment, a rebounding economy and the re-start of weddings playing contributing roles.
In contrast, Chinese fabrication fell 25% (-54 koz) due to fierce competition from gold and COVID-related disruption. Global platinum jewellery demand in 2021 is forecast to rise by 4% (+69 koz), with the most significant rises in Europe (+20%) and North America (+35%).
Similarly, these healthy gains will be neutralised by an expected 14% decline in China (-116 koz). Investment demand settles after two colossal years Following the exceptional demand in 2019 and 2020 for ETFs and bar and coin, elevated further in 2020 by unprecedented exchange stock inflows, investor demand in Q2’21 was a robust 191 koz, albeit a 50% fall year-on-year.
ETF holdings continued to grow in Q2’21 by 31 koz, and rising by 137 koz in H1’21 with strong gains in North America and Europe offsetting declines in South Africa, where rotation from the ETF to platinum mining equities was to benefit from healthy dividend yields.
Bar and coin demand in the quarter remained historically high, easing slightly by 10% year-on-year to 111 koz and exchange stocks increased by 49 koz in response to increased mitigation of risk by market maker banks.
For the year, investment demand is forecast at 521 koz, which although 66% lower than in 2020 is still above the pre-COVID average from 2013 of 495 koz per annum. Paul Wilson, CEO of the World Platinum Investment Council commented: “Since the start of this year, the pace of recovery in economic activity has exceeded expectations with both platinum demand and supply increasing, a trend which looks set to continue for the rest of the year.
“While we have revised our forecast to a modest surplus in 2021, this should be considered within the context of the unprecedented and seismic change caused by the pandemic. There are currently a number of different dynamics at play. In the short term, the transitory nature of higher mine supply in 2021 and 2022 arising from processing the semi-finished material built up during plant outages in 2020 has presented an upsurge in supply that has tipped the balance. Meanwhile, chip shortages are hampering growth potential in the automotive sector. Longer term, however, signs of an established recovery are present, benefitting in particular the industrial and automotive sectors. Demand growth appears likely due to higher loadings and rising production of heavy-duty vehicles, increasing platinum substitution for palladium, industrial demand growth and growing investor interest in the burgeoning hydrogen economy.”
