Forecast for platinum surplus trimmed

Looking at platinum in 2022, mine supply challenges are expected to continue but the availability of scrapped vehicles for recycling supply is expected to improve as the year unfolds, while quarterly automotive, jewellery and industrial demand are forecast to remain broadly at Q1’22 levels, with some of the negative investment demand reported in Q1’22 expected to reverse.

Starting with mine supply, Anglo American Platinum, Impala Platinum and Northam Platinum have all lowered production guidance due to their own specific operational constraints, compounded by COVID disruptions, increased safety-related production stoppages, community unrest and supply chain procurement challenges.

The production outlook for Nornickel has also been reduced due to the supply chain challenges it is likely to face as a result of sanctions against Russia. These may impact Nornickel’s ability to source mining equipment and consumables from Western suppliers (although Nornickel itself has not been sanctioned as yet).

The net impact is a reduction in forecast 2022 total mining supply to 5,872 koz, down 7% (-425 koz) year-on-year and 247 koz lower than previous expectations. Recycling supply expectations have also been trimmed by 2% year-on-year to 1,909 koz (-153 koz), primarily due to reduced scrappage rates limiting raw material supply as consumers are forced to run existing vehicles for longer due to the constrained supply of new vehicles.

Despite Russia’s invasion of Ukraine negatively impacting European automaker manufacturing supply chains, as well as exacerbating the semiconductor shortage (Ukraine was a major supplier of the neon gas needed for semiconductor manufacturing), automotive demand for platinum is reduced by only 74 koz from previous expectations, and is now forecast to total 3,055 koz in 2022,

+16% (412 koz) year-on-year.

This reflects a view that the semiconductor shortage will ease as the year unfolds, as well as increased loadings and substitution offsetting a weaker outlook for the number of vehicles to be produced.

Jewellery demand is expected to decline 2% year-on-year (-37 koz) as severe measures to combat COVID outbreaks impede retail activity in China, offsetting stronger demand year-on-year from every other region.

Industrial demand for platinum is expected to decline 16% year-on-year (-399 koz) to 2,109 koz. This is down from the record level reached in 2021 which was boosted by significant capacity additions, especially in glass, but it still remains the third strongest year ever, underlining the continued growth in platinum’s importance for industrial applications.

The weak investment environment seen in Q1’22 is expected to partially reverse through the rest of 2022. Bar and coin investment is forecast to total 254 koz, down 78 koz from 2021 due to the higher dollar platinum price coupled with the weaker yen leading to profit taking selling back in Japan, partially offsetting stronger demand in Europe and North America.

ETF holdings are expected to reduce by 50 koz in 2022, reflecting an anticipated recovery from the outflows of 169 koz seen in Q1’22. The reduction in ETF holdings in the quarter related primarily to liquidations from a specific European ETF with liquidations also seen from other precious metal ETFs from the same issuer, despite investors finding hard assets attractive due to surging inflationary worries and elevated geopolitical and economic uncertainties.

Stocks held by exchanges are expected to continue the trend seen in 2021 of being used as a source of metal to satisfy demand in the London and Swiss markets, and to decline by 100 koz.

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