Platinum poised for first global deficit in three years

London — A surge in investment buying will push the global platinum market into a small deficit in 2019 — the first since 2016 — but a hefty surplus will return in 2020, the World Platinum Investment Council (WPIC) said on Thursday.

Investors betting that prices of platinum will rise from close to 10-year lows will buy 1.2-million ounces in 2019, up from just 15,000oz in 2018, the WPIC said in its latest quarterly report. That will more than offset decreases in platinum use in jewellery, auto manufacturing and other industries, pushing the roughly 8-million-ounce-a-year market to a shortfall of 30,000oz, it said.

However, the WPIC forecast that investor purchases would dip to 525,000oz in 2020, and this along with further declines in auto and jewellery consumption will create a surplus of 670,000oz.

Nearly two-fifths of platinum is used in vehicle exhausts, mainly for diesel engines, to reduce harmful emissions. But a decline in diesel vehicle sales since a Volkswagen emissions scandal in 2015 has sapped demand. This helped push platinum prices to a low of $751.25 an ounce in 2018 — about half its value in 2014 — before a recovery to about $900.

Diesel’s market share has now stabilised and platinum has become cheap compared to palladium and rhodium , which are also used to curb vehicle emissions. As a result, some investors believe demand from the auto industry will rise, pulling prices higher.

The WPIC is funded by mining companies but uses data from SFA Oxford, an independent consultancy. It said its figures did not include any assumption of higher diesel vehicle sales or a switch by automakers to platinum from other metals.

Reuters