Market Speaks: Global Platinum Market Surplus Likely To Contract This Year

The annual supply surplus in the platinum market is likely to contract in 2018 as demand rises but South African mine production shrinks, stated the World Platinum Investment Council yesterday, according to media reports. The WPIC said it looks for the supply surplus to fall to 180,000 ounces this year from the revised 315,000 in 2017. Producers are contending with reducing their costs to offset increased labor costs driven up by more than inflation. Moreover, utilities and consumables, coupled with a low platinum price and the strong rand, continue to put severe pressure on margins and capital expenditure.

In the first quarter, the market was in deficit by 125,000 ounces, the organization said. The WPIC said South African mine supply fell in the first quarter to its lowest level since 2016 at 985,000 ounces. However, the forecast South African mine supply which accounts for three-quarters of the world’s mine output – has been revised up to 4.36 million ounces for full-year 2018. The global mine supply is seen falling to 6 million ounces from 6.15 million last year. When including recycling, total global supply is forecast to fall to 8 million ounces from 8.08 million.

The global demand is forecast to be marginally higher for the year, despite a fall in total automotive demand, in particular for diesel-powered vehicles that require the metal for catalytic converters, the WPIC said. All forms of demand are seen rising to 7.8 million ounces from 7.77 million. Use of platinum for autos is seen easing 3% to 3.3 million ounces. However, other industrial demand and jewelry-related consumption are forecast to rise. The consumption of the metal for jewelry purposes is seen rising by 2% to 2.51 million ounces in 2018. Excluding autos, industrial demand is seen rising by 0.6% to 1.75 million ounces. However, the investment demand was forecast to ease 4% to 250,000 ounces in 2018.