LAWRIE WILLIAMS: WPIC increases platinum deficit forecast for 2015
The World Platinum Investment Council (WPIC) has today released its latest quarterly report on the state of the global platinum sector. The report is based on figures produced by independent consultants SFA (Oxford). While it perhaps has little of real cheer for the platinum sector, it does at least suggest that this year’s annual supply deficit will be higher than it had forecast in its previous quarter’s report although this would likely only be the case if investment demand continues to show some strength. It is possible that the low platinum price will keep investors coming in, and may also positively impact some of the more price sensitive aspects of the global market – like jewellery demand.
The report points out that global platinum output remains strong, even in the face of low metal prices as the South African mines, which dominate global new mined supply, have made a more rapid recovery that forecast from the five-month strike last year, which effectively shut down around 60% of the country’s production. The thus hugely increased output from South Africa in H1 compared with 2014 has also been supplemented by production rises from the world’s next two largest producers, Zimbabwe and Russia, which have respectively seen output rise by 20,000 ounces and 10,000 ounces respectively over Q1 figures. WPIC estimates South African refined production for the quarter at 1.08 million ounces as operational and safety performance improved, compared to the below par production of 890,000 ounces in Q1.
While it is apparent that an important proportion of South African production is under water financially at current prices – notably in Anglo Platinum (Amplats)’s deep mines in the Rustenburg area, but also for some other producers too – mine closures and personnel retrenchments remain difficult politically in the South African high unemployment situation and with a militant dominant Union representing the majority of the workers. Anglo Platinum has made no secret that it would like to sell off its Rustenburg and Union Platinum operations – and Sibanye Gold is known to be interested in moving into the sector and is apparently in talks with Amplats over Rustenburg but not Union. Sibanye is the Gold Fields spin-off which incorporates most of the latter’s aging South African gold mining operations and has proved adept at eking out profits from these, so is presumably hoping to do the same with the Rustenburg platinum operations – while longer term hoping for a big improvement in the platinum price to turn them into a real money-spinner.
Overall, WPIC puts the global platinum market as remaining in deficit during Q2 with an estimated shortfall of 55,000 ounces. This is actually a smaller deficit than in Q1 due to the increased mining supply from South Africa due to higher operational efficiencies and improved safety performance than in Q1; lower jewellery demand in China, partly as expected, as Q1 2015 would have benefitted strongly from Chinese New Year related sales; a sharp increase in investment demand with significant growth in bar and ETF demand reversing the weakness in the preceding three quarters and; robust automotive demand remaining at similar levels to Q1 2015 supported by strong vehicle sales in Western Europe and North America, although there appears to have been a recent big fall-off in Chinese auto sales.
Total global supply of platinum was estimated at 1.985 million ounces during Q2 with the mine supply contribution put at 1.52 million ounces.
On the demand side that for platinum was estimated 2.04 million ounces in Q2, up by a fairly small 15,000 ounces compared to the first quarter of 2015. While autocatalyst demand is seen as remaining robust at 875,000 ounces for the quarter platinum jewellery appears to have slipped by 665,000 ounces, an 11% decline quarter on quarter. Demand in China in Q2 was seen as having eased due to the declining platinum price and ongoing lower gold related footfall through stores. However, to an extent this was countered by continued growth in jewellery sales in India.
Industrial demand declined by an estimated 4% (15,000 ounces) quarter-on-quarter to 400,000 ounces seen as being primarily due to uneven timing in plant expansions in the glass and chemical sectors.
There does however appear to have been a sharp increase in investment demand reflected by an increase in bar and coin sales and a turnaround in ETF demand, from three successive quarters of net sales (50,000 ounces in Q1) to net purchases of 45,000 ounces in Q2. WPIC notes that the majority of gains were in the two South African funds, which increased their holdings by a combined 60,000 ounces. US investors were also noted as moving from being net sellers in Q1 to becoming modest purchasers in Q2 increasing their ETF holdings by 9,000 ounces.
Continuing on the investment front, bar and coin purchases rose sharply to 60,000ounces in Q2 from 35,000 ounces in, with a particular;y strong performance in Japan as investors took advantage of lower prices in local currency terms.
So overall the WPIC now comes up with a forecast supply deficit for the year of 445,000 ounces from its earlier 190,000 ounces which it came up with at the end of the previous quarter, and sees the sharp rise in investment interest in the metal as continuing and underpinning the increased deficit projection. Total supply is thus estimated at 7.91 million ounces, but with total demand of 8.355 million ounces with the continued growth in automotive, industrial and investment demand set to offset a decline in jewellery demand in 2015 when compared to 2014.
Most significantly autocatalyst demand is forecast to grow by 5% to 3.445 million oz for the year despite the poorer figures currently coming out of China.
The WPIC’s latest Platinum Quarterly may be downloaded free of charge from the WPIC’s website: www.platinuminvestment.com
08 Sep 2015 | Categories: Platinum