(Kitco News) – It might solely be a matter of time earlier than platinum costs begin to rise because the valuable steel is anticipating to see a large provide deficit this yr persevering with into 2021, based on the newest analysis from the World Platinum Funding Council (WPIC).
In its newest third-quarter market report, the council stated that platinum is dealing with a provide deficit of greater than 1 million ounces this yr as mine provide can not sustain with rising demand. subsequent yr, the platinum market might see a provide deficit of greater than 200,000 ounces.
“Regardless of the robust quarter-on-quarter restoration in mine and recycle provide, the stellar rebound in automotive demand and sustained robust funding demand for valuable metals, together with platinum, lifted Q3’20 platinum demand nicely above provide,” the WPIC stated in a press launch.
The report stated that the full platinum provide in Q3’20 was down by 5% from Q3’19; nonetheless, the decline is comparatively modest in contrast to the 36% drop in Q2’20. In the meantime, complete mine provide grew by 4% within the third quarter, in comparison with 2019. Nonetheless, mine provide is predicted to fall 21% this yr.
“Regardless of the robust restoration of provide and demand in the third quarter of 2020, when in comparison with the second quarter, total weak provide and really robust investor demand have been the principle contributors to the -709 koz deficit within the quarter,” the report stated.
Just like gold and silver, the platinum market has seen unprecedented investor demand this yr. In accordance with the report, third-quarter funding demand rose by 730,000 ounces, a 291% improve in comparison with final yr. Funding demand included a 42,000-ounce improve in coin and bar. The WPIC stated that bodily bullion demand is predicted to rise 123% in comparison with 2019.
Trevor Raymond, director of analysis with the World Platinum Funding Council, stated that many buyers proceed to observe the platinum market as they consider the valuable steel’s long-term provide and demand fundamentals.
He added that the largest shock for him within the third quarter is that the worth hasn’t reacted to the rising imbalance within the market. Though platinum has seen a pointy restoration from the March selloff, the worth stays caught under $1,000 an oz. January platinum futures are caught in a tight vary between $850 an oz and $950 an oz.
Raymond added that he expects that it’s only a matter of time earlier than platinum costs react to the tightening provide. He stated that platinum at present stays an undervalued asset within the commodity market.
“I believe extra buyers might be being attentive to platinum as they search for worth exterior of the inventory market,” he stated. “Copper costs are working greater, gold is working, silver is working and it will not be lengthy earlier than its platinum begins to maneuver.”
Whether or not the platinum market can maintain its present tempo of progress, particularly relating to funding demand, Raymond stated that the market nonetheless has loads of room to maneuver greater. He added that platinum will play a vital function in growing inexperienced know-how, notably hydrogen-powered autos.
“Final yr, when EFT demand reached one million ounces, buyers have been saying that wasn’t sustainable, however ETF demand continues to develop,” he stated. “You do not want a lot funding demand to have an affect in platinum. From a long-term perspective, the market is way from saturated.”
However the platinum market is extra than simply funding demand. Raymond stated that platinum’s industrial element must also present important help for the valuable steel via 2021. With information of potential vaccines for the COVID-19 virus, there’s hope that the worldwide economic system will see a quicker than anticipated restoration.
“Persons are beginning to consider touring once more in autos and plans and people engines might be utilizing extra platinum,” he stated. “Platinum stays the most affordable possibility relating to lowering emissions.”
Whereas demand is predicted to stay wholesome, Raymond stated that provide will proceed to be a problem. He defined that in 2021 the platinum market will proceed to really feel the consequences of a converter plant outage within the first half in South Africa. The outage eliminated practically 900,000 ounces of provide this yr.
Raymond added that it’s going to additionally take a couple of years for mines to restart manufacturing reduce in the previous couple of years attributable to low costs.
“The danger for South African platinum provide progress in 2021 could be very low, however demand progress stays very fascinating,” he stated.
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