Platinum demand recovery forecast in 2023

May 10, 2023

The World Platinum Investment Council – WPIC – publishes its Platinum Quarterly for the fourth quarter of 2022, full year 2022, and a revised forecast for 2023. 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, reflecting improved product availability in North America and Europe and net disinvestment in Japan swinging to net investment.

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.

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).

“From a macro perspective, 2023 is expected to be a difficult year, with an uncertain economic environment, inflationary headwinds, and a global energy crisis. And yet, going against the grain, 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.

Although power supply risks and operational challenges are included in forecast mining supply for 2023, a worsening of electricity supply shortages in major producer South Africa or sanctions-related operating challenges in Russia present downside risks to supply.

In contrast, although demand forecasts include the negative impact of inflation and lower global economic growth, their downside is well protected. Here, strong demand growth results mainly from ongoing platinum for palladium substitution in automotive applications, already committed glass capacity additions, robust bar and coin demand, and the significant outflows from ETFs and exchange stocks having largely run their course.

Since 2021, we have observed the massive platinum imports into China – which were far in excess of identified demand – much of which have not been captured by our published data. Whether this will reflect actual demand – as we are seeing with the glass capacity expansions in 2023 identified in today’s report – or stock held in China, it may not be available to re-enter Western markets to address the deficit in 2023 due to domestic export controls, and so will lead to further market tightening.

Looking beyond today’s report we continue to highlight the strong link between platinum and the hydrogen economy. While hydrogen-related platinum demand is relatively small, it is expected to grow substantially in the medium term; as hydrogen demand becomes meaningful platinum could become a proxy for investors looking for exposure to hydrogen.

An emergent new end source of demand for a commodity is a relatively rare occurrence and somewhat unique to platinum at this point in time, which only strengthens the investment case for platinum, particularly in a deficit market” said Trevor Raymond, Chief Executive Officer of WPIC.

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