In the context of the marked improvement in economic activity, analysts expect the last three months of 2020 to see a further recovery, as governments and businesses continue to find ways to stimulate and promote increased consumption and production.
Despite this, total supply for the full year is expected to be down 18% (-1,524 koz). Compared to supply, the decline in demand is somewhat lower due to significant investment demand growth cushioning the drop.
Total platinum demand for the year is forecast to be down by 5% (-410 koz), led by declines of 16% (-464 koz) in automotive demand, 13% (-274 koz) in jewellery demand and 4% (-79 koz) in industrial demand. Despite ETF demand being 47% (-461 koz) below the 2019 level, the healthy 123% (+347 koz) forecast increase in bar and coin demand and the unprecedented inflows of 520 koz into stocks held by exchanges (primarily CME approved warehouses) are expected to see investment demand grow by 32% (+406 koz).
As a result of the 18% decline in supply, due mainly to mine supply curtailment and the 5% decline in demand, as elevated investment demand offset declines elsewhere, the platinum market is expected to shift into a deficit of -1,202 koz in 2020.
PLATINUM 2021 OUTLOOK
In 2021 total supply is forecast to increase by 17% (+1,127 koz) year-on-year to 7,865 koz, recovering to 95% of the pre-pandemic level. Mine supply is expected to sharply rebound 20% (+976 koz) year-on-year to 5,772 koz following the extreme disruption of 2020.
South Africa will account for most of the gains and is forecast to rise 32% (+992 koz) year-on-year to 4,092 koz as output recovers following the processing infrastructure failure and pandemic curtailed operations of 2020.
The mine restructuring and shaft closures of the previous few years, a response to the low PGM price environment, have now been fully implemented with the decline in mine capacity expected to stabilise in 2021.
Reserve depletion will necessitate an additional Western Limb shaft closure, but losses will be offset as replacement shafts at the same mine complete their ramp-up.
Existing growth projects continue to bring online modest additional volumes. However, in response to COVID-19 uncertainty, miners’ reduced risk appetite will see deferred capital spending and delayed project development.
Additionally, pandemic disruption meant equipment suppliers were unable to deliver key new project equipment items and as a result, volumes from project development will be less than originally planned.
Given the increased PGM basket prices, the industry continues to assess further growth options with many targeting higher palladium lower platinum ore bodies. Feasibility studies for two major Northern Limb projects are expected by the end of 2021.
However, unlike previous cycles mining companies are prioritising returning value to shareholders above development capital spend. This means that potential significant new volumes remain several years away.
Material risk for South African mine production remains, as the country’s electricity supply crisis has worsened with cumulative load shedding in 2020 exceeding prior years. Eskom continues to warn that the electricity supply grid will be unreliable and supply unpredictable for the next year until maintenance programmes are completed in September 2021.
Russian output is expected to increase 2% (+10 koz) year-on-year to 682 koz as additional mine capacity is commissioned and a refinery upgrade reaches full capacity. North American output is forecast to reach 369 koz, up 5% (+16 koz), as declines in secondary by-product production from nickel mining are more than offset by growth from a primary producer.
Output from Zimbabwe is expected to be 2% (-9 koz) down as one mine complex, placed on care and maintenance due to COVID-19, returns to full production and output from a new mine development mostly offsets declines at two mines nearing their end-of-life. Global platinum supply from recycling is forecast to grow 8% to 2,093 koz (+151 koz). We forecast autocatalyst recycling to return to growth, with a 6% rise (+87 koz) to 1,573 koz as global logistics gradually return to pre-pandemic status and as economic growth gradually improves, new vehicle sales increase the volume of vehicles that are scrapped. Jewellery recycling volumes in 2021 are forecast to grow by 16%, as a result of fewer restrictions and relatively higher platinum prices, with China accounting for the bulk of gains.