Platinum market expected to see a deficit of 418K, after a record deficit of 878 in 2023 – WPIC

In its fourth-quarter and year-end trends report, the WPIC updated its supply/demand outlook for 2024, and it expects to see a market deficit of 418,000 ounces this year after a record deficit of 878 koz in 2023.

In an interview with Kitco News, Edward Sterck, Director of Research at the WPIC, said two years of significant deficits are taking its toll on above-ground stocks. As those continue to be depleted, prices will be more sensitive to falling supply and robust demand.

“Further risks to supply are going to remain the focus, I think, particularly for the investor community this year,” he said. “ We’ve seen all of the major producers announce restructuring plans so far and  I would say that the full impact of those plans is yet to be fully understood. This creates a good environment for investors. The incentive for investors to buy platinum is the growing supply risks as demand remains robust.”’

Platinum prices are currently trading at a two-week high above $900 an ounce as investors digest the latest comments from the WPIC. April platinum futures last traded at $909 an ounce, up 2% on the day. However, the grey metal still faces initial resistance at $920 an ounce. Meanwhile, analysts have said that the big test for platinum comes at $1,000 an ounce.

Although platinum prices have struggled through 2023, the market’s supply and demand fundamentals remain highly supportive.

The WPIC said that the 2023 record deficit was driven by record industrial demand as total demand surged 25% last year.

“Industrial demand hit a record high in 2023, increasing by 12% to 2,622 koz, driven by significant expansions in the glass (up 39% to 701 koz) and chemical sectors,” the WPIC said in a prepared statement.

At the same time, the automotive sector remains the dominant pillar of demand for platinum.

“In 2023, automotive platinum demand surged by 16% to 3,272 koz, benefiting from rising vehicle production and a greater hybrid vehicle share, with increased PGM loadings linked to hybridisation,” The WPIC said.

The WPIC also noted mixed investment demand for platinum as Japanese consumers drove physical bar and coin demand. At the same time, platinum-backed exchange-traded funds saw net outflows in 2023. Investment demand for platinum rose to 265,000 ounces last year.

Looking to 2024, while demand is expected to cool slightly this year, Sterck said that it still remains fairly robust. The WPIC said it expects total demand to fall 6% in 2024. “However, this is still above the five-year average since 2019 – while total supply is projected to decrease further by 1% year-on-year to 7,089 koz,” the analysts added.

Although industrial demand is expected to weaken slightly next year, Sterck said it will be the fourth strongest year on record.

Meanwhile, Sterck said that automotive demand also remains strong as hybrid vehicle sales are expected to remain relatively strong compared to electric vehicle sales.

“Hybrids seem to be the transition technology of choice, and obviously that’s beneficial for PGMs,” Sterck said.

Although a potential recession could impact some platinum demand,  Sterck said that he expects the market to be relatively recession-proof as the precious metal remains essential to the ongoing green energy transition.

“More than 80% of all platinum‘s end uses is going into applications where it’s reducing energy requirements or reducing harmful emissions,” Sterck said. “The motivation for using it in those end uses doesn’t go away even in a recessionary environment.”

Meanwhile, the growing hydrogen economy continues to represent the biggest growth opportunity for platinum.

Platinum is an essential catalyst within electrolyzers that are used to separate hydrogen and oxygen molecules in water. At the same time Platinum-intensive fuel cells are the only commercial option within the transportation sector.

“I think 2024 could be a bit of a transformative year for platinum, in terms of hydrogen,” said Sterck. “Hydrogen demand is starting from a small base, but by our numbers, by 2030, we get to something approaching a million ounces of platinum demand from hydrogen. That’s quite a meaningful amount of new demand.”

Sterck added that real money is coming into the market to support the hydrogen economy and it has moved on from being a hypothetical science experiment.

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com