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Investment Council Remains Bullish On Platinum March 10, 2021 (0 comments)
London, UK—The World Platinum Investment Council (WPIC) on Wednesday published its Platinum Quarterly for the fourth quarter of 2020, including a revised forecast for 2021.
For the third consecutive quarter, platinum posted a deficit (-170 koz in Q4 2020), as strong demand in automotive, industrial, and jewelry sectors plus sustained strong investment demand for platinum outstripped constrained supply. Key highlights of the report include:
- Supply down 17% in 2020, while demand down only 7% and deficit of -932 koz – the largest on record
- Third consecutive annual deficit forecast for platinum in 2021
- Automotive platinum demand in 2021 forecast to increase 25% accelerated by Chinese heavy-duty vehicles
- Investment demand to remain strong as platinum's links with the hydrogen economy continue to attract investor interest, while platinum remains heavily undervalued compared to gold and palladium
Overall, despite a year that saw the global economy contracting by 3.5%, the platinum market deficit in 2020 was -932 koz, the largest on record. While total demand dropped by 7% (-569 koz), the sharp decline in mining supply of 20% (-1,203 koz) and the fall in recycling of 10% (-210 koz) contributed to total supply being down 17% (-1,413 koz).
Against a backdrop of widespread vaccine programs seeing economies return towards normal activity in 2021, platinum demand is forecast to increase by 3% (+254 koz) to 7,992 koz, while supply will recover 17% (+1,126 koz) to 7,932 koz resulting in a deficit of -60 koz in 2021, the third consecutive annual deficit. The demand growth in 2021 is expected to be driven predominantly by strong recoveries in automotive, jewelry and industrial demand, offsetting reduced, yet still strong, investment demand.
Strong recovery underway in jewelry sector. Platinum jewelry fabrication turned positive in Q4 of 2020, up 7% with notable increases in demand in North America (the first year-on-year quarterly increase of 4%) and China, where it posted the third consecutive year-on-year increase since the 15% noted in the beginning of 2017. In 2021, total jewelry demand is expected to increase 13% above 2020 levels, with improvements in every market as economic life returns and the worst of COVID-19 passes.
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Investment demand stays high. Bar and coin net purchases more than doubled year-on-year, growing 112% (+32 koz) while ETF holdings were up 56% on the prior year. Investors continue to be very interested in platinum due to its key roles in the hydrogen economy and its use in fuel cell electric vehicles and significant near-term substitution of platinum for palladium. Also, the metal's substantial discount to both gold and palladium suggest strong future fundamentals. Platinum investment is expected to remain strong in 2021—forecast to be above the five-year average—although it may not exceed the exceptional levels seen in 2020.
Paul Wilson, CEO of the World Platinum Investment Council, commented, "In a year of extremes, as 2020 was, we became accustomed to the term 'record level' in what we saw and read. Platinum's record annual deficit and record investment demand in 2020 highlight platinum's precious attraction as a hard asset during periods of high global risk, because of its deep discount to gold and palladium and due to its significant short- and long-term demand growth potential.
"However, as we re-emerge from the pandemic, we now consider the role platinum has to play in global decarbonization, one of the clearest global imperatives to emerge during the pandemic. The combination of this substantive demand growth, combined with the rally in recent months, could well drive increased investment demand."