PLATINUM: From oversupply to deficit amid lockdowns

The impact of the ongoing COVID-19 pandemic continued to unfold through the second quarter of 2020, as government lockdown measures to limit the spread of the virus prompted sharp contractions in global economic activity and heightened market volatility.

Platinum market demand and supply have both been significantly reduced year-on-year by the impact of the pandemic. However, due in part to supply issues unrelated to the pandemic, plus the robust nature of physical investment demand, the potential effects of the pandemic on platinum’s market balance are far less negative than previously expected.

Total platinum supply in Q2’20 was down year-on-year by 35% (-748 koz). Total mining supply shed 40% (-648 koz) due to the constraints experienced predominantly in South Africa. Meanwhile, global secondary supply from recycling felt the impact of the pandemic more severely during this quarter, posting a 19% (-100 koz) decline compared to Q2’19.

Total platinum demand in Q2’20 was down by 19% (-387 koz) due to declines in automotive demand of 48% (-360 koz), industrial demand of 25% (-145 koz) and jewellery demand of 27% (-149koz). This contraction reflects challenges during the quarter, as many factories were impacted by lockdowns and then, as they emerged from lockdown with new socially distanced production protocols, by supply chain disruptions as well as, in some cases, re-introduction of localised lockdowns.

In contrast, all areas of investment demand strengthened in Q2’20, up year-on-year by 212% (+267 koz). The most significant increase in demand was the change in stocks held by exchanges which rose by 151 koz to 138 koz. In addition, the Change in ETF holdings rose by 72 koz to 122 koz while bar and coin demand increased 44 koz to 133 koz.

The offset that rising investment provided to the losses suffered elsewhere meant that overall demand fell less sharply than supply in Q2’20. In turn this meant that the platinum market ended up being in a deficit of 191 koz for the quarter.

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