Platinum Quarterly Update Covering Q4 and FY 2022 and Forecast FY 2023
The Foreword to the report provides an overview of supply and demand developments in the platinum market, as well as our view on issues and trends relevant to considering exposure to platinum as an investment asset.
Key data from the report, which can be downloaded here, are highlighted below:
After two years of significant surpluses the platinum market is forecast to move to a material deficit in 2023. The change from the 776 koz surplus in 2022 to the forecast deficit of 556 koz in 2023 is over 1.3 Moz. This reflects total supply remaining close to the weak level in 2022, up only 3% to 7,428 koz (+201 koz), and strong demand growth of 24% to 7,985 koz (+1,534 koz).
Total supply was down in both Q4’22 (-18% year-on-year to 1,739 koz) and full year 2022 (-12% to 7,227 koz), as prevailing headwinds in both mining and recycling supply severely curtailed output.
For 2022, total mining supply declined 11% year-on-year (-659 koz) and is forecast to remain broadly flat in 2023 (+28 koz).
Global recycling in 2022 fell 17% year-on-year (-349 koz) on reduced availability of end-of-life vehicles and lower jewellery recycling. Global recycling is expected to recover by 10% in 2023 to 1,856 koz, driven by an increase in the availability of spent autocatalysts, with autocatalyst recycling forecast to recover by 12% to 1,391 koz.
Automotive demand growth trajectory continues into 2023
Automotive demand for full year 2022 increased by 12% year-on-year (+311 koz), reaching 2,957 koz. Despite vehicle production remaining short of pre-pandemic levels, a combination of factors is boosting platinum automotive demand growth. Firstly, in 2022, there was a 28% increase in the manufacture of hybrid vehicles, which typically require higher loadings in the aftertreatment system. Secondly, tighter emissions legislation, particularly in China, also resulted in higher loadings (especially in heavy-duty diesel vehicles). Lastly, there was growing platinum for palladium substitution, and, significantly, the increase has meant an upward revision to the substitution estimate by close to 100 koz, to 540 koz for 2023. With these trends set to continue, global automotive demand is expected to increase by 10% in 2023 to 3,246 koz (+288 koz).
Industrial demand in 2023 forecast to match the strongest on record
Industrial demand for platinum is expected to be an area of stand-out strength in 2023, up 12% year-on-year to 2,505 koz (+262 koz), and just 26 koz below the level in 2021, the strongest year on record.
Jewellery demand set to increase as restrictions in China ease
With China, the largest platinum jewellery market, in lockdown for much of 2022, jewellery demand declined by 3% (-59 koz) to 1,894 koz for full year 2022. As restrictions ease, and consumer confidence returns, 2023 is forecast to see a 15% (+73 koz) demand increase in China. Growth is also expected in Japan and in India. Meanwhile, declines are anticipated in Europe and North America on account of fewer weddings and recessionary fears. In all, global jewellery demand is expected to improve by 2% (+42 koz), growing to 1,936 koz in 2023.
Investment demand recovery forecast in 2023 – improving by over 900 koz
Investment demand is expected to improve significantly in 2023. Platinum bar and coin demand is forecast to jump by 100% to 450 koz in 2023, a three-year high. Meanwhile, outflows in ETFs (-132 koz) and exchange stocks (-20 koz) will continue to slow, with some renewed interest in South Africa for platinum ETFs in preference to mining equities. The result will mean net investment demand of 298 koz in 2023.
In conclusion, the platinum market is forecast to be in deficit after two consecutive years of significant surpluses. This year’s forecast deficit is unlikely to be a one-off, either, with challenges to supply expected to continue and future demand growth, supported by the needs of the hydrogen economy, likely to result in deficits continuing for a number of years.