Platinum prices, which have risen since the start of 2021, look set to continue upwards despite questions over supply and demand.
As demand is expected to increase in 2021, platinum prices are likely to continue rising this year despite increased production, particularly from South Africa, the World Platinum Investment Council (WPIC) and Johnson Matthey said in separate reports published today.
Platinum prices reached $1,242/troy ounces (toz) today, according to Johnson Matthey, an 11.6pc year-to-date increase after starting the year at $1,113/toz on 4 January. Prices have averaged $1,186/toz this year, which is significantly higher than the 2020 average of $893/toz and the 2019 average of $868/toz.
Demand set to increase
Global demand for the precious metal is expected to increase in 2021 from the automotive and jewellery sectors.
Automotive demand for platinum is set to rise by 24pc to 2.9mn oz in 2021 from 2.3mn oz in 2020 as higher emissions standards in China and Europe have boosted consumption of the precious metal, WPIC said. It is used in auto catalysts to reduce greenhouse gas emissions. Additionally, as platinum prices are lower than palladium, some firms have started substituting platinum for palladium within these catalysts, which is likely to push demand higher.
But Johnson Matthey and WPIC raised concerns over sustained demand from the automotive industry as most original equipment manufacturers have curbed output because of ongoing semiconductor shortages, which would also reduce consumption of platinum.
Similarly, jewellery demand is expected to rise this year to 1.9mn oz, from 1.8mn oz in 2020, led by India, Europe and North America, WPIC said.
So far this year, Chinese retail sales were disappointing, largely because gold prices have become more attractive than platinum-group metals and the closure of jewellery stores for two months following the lunar new year decreased buying activity, Johnson Matthey said.
Industrial demand — the smallest demand centre for platinum — is also set to increase, it said.
"Major applications in the chemicals, glass-making and electronics sectors [are] continuing to enjoy strong demand," the chemical producer said, adding that "sales of platinum to the glass industry could set an all-time record on the back of a fresh wave of Chinese capacity expansions".
Johnson Matthey expected industrial demand to edge higher, to 2.36mn oz, in 2021, from 2.31mn oz in 2020.
Supply growth expected
Supply of the precious metal is expected to grow this year as increased production in South Africa is likely to offset lower Russian output.
Anglo American Platinum's converter plant was restored to full capacity in December 2020, which pushed up South Africa's platinum-group metals processing capacity to nearly 100pc. But much of primary output will rely on South Africa, as Russian output is expected to fall as a concentrator remains shut in the second and third quarters because of flooding.
But WPIC and Johnson Matthey differed on whether the market would reach a surplus or deficit in 2021.
WPIC expects the market to remain in a deficit, with total demand reaching 8mn oz and supply 7.8mn oz, resulting in a deficit of 158,000 oz. On the other hand, Johnson Matthey expects a surplus of 615,000 oz, with net demand amounting to 5.4mn oz and primary supply to hit 6.1mn oz. This difference is likely owing to the way recycled volumes are reported, with Johnson Matthey discounting it from total demand and WPIC adding volumes to mined supply. If Johnson Matthey's recycled volumes were added to primary supply, it would suggest a deficit of 615,000 oz instead, analysis shows.
