Platinum Supply Declined by 27%

Johannesburg: Platinum is set to see a global shortfall of 885,000 ounces in 2014, 27 percent more than in 2013, according to a quarterly report by World Platinum Investment Council (WPIC).

The sharp drop in supply comes mainly from a 31 percent fall in mining supply from South Africa, largely attributed to the five-month strike which hit the South African platinum mining industry earlier this year. Although there was an increase of mining stocks coming out of North America, the 10 percent increase was unable to offset the total shortfall.

On the demand side, total global demand for platinum in 2014 is expected to be six percent lower than in 2013 at 8 million ounces, as a decline in investment demand offsets growth in automotive and jewellery demand.

Automotive and jewellery demand, making up the largest sources of demand for platinum is set to grow this year. Demand from the auto sector is forecast to grow five percent due to the manufacturing of Euro VI-compliant vehicles.

“Euro 6 legislation came into force in September 2014 for new models and will be enforced for all light vehicles sold from September 2015. The imposition of Euro 6 legislation supports higher platinum demand, “the report said.

Euro 6 systems typically contain a platinum–palladium diesel particulate filter designed to capture soot, contributing to a cleaner emission.

Global jewellery demand in 2014 is expected to continue to grow, with an additional four percent or 115,000 ounces of demand forecast. Chinese demand for platinum jewellery remains robust and platinum continues to make important inroads into the newer, Indian market.

“Platinum jewellery continues to gain ground in India, with 25 percent growth in demand to 175,000 ounces forecast for 2014. Compared to the universal appeal of gold, the platinum jewellery market in India is niche…India is the least price sensitive of the platinum jewellery markets; buyers see it as a store of value and expect it to appreciate in value,” the report said.

Contribution to the decline in demand for platinum comes mainly from the investment sector, with the most drastic slump coming from change in stocks held by exchanges and seen to fall 429 percent this year. ETF holdings are expected to drop 70 percent year-on-year, while investment in bars and coins are seen to fall 200 percent.