A 983 koz Platinum shortfall is anticipated for 2023 because of higher-than-anticipated demand growth outpacing limited supply

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It has been reported that Global Demand for platinum surged by 28% (+441 koz) in the first quarter of 2023, thanks to growing investment demand and strong momentum in the automotive and industrial sectors. This was coupled with a decrease in the supply of refined platinum production (-8% YoY, -96 koz) and a reduction in autocatalyst recycling (-15%, -52 koz) and jewelry recycling (-3%, -3 koz). As a result, the market experienced a deficit of 392 koz – the first quarterly deficit since Q2-21.

These developments have led to a significant increase in the deficit forecast for the whole of 2023, which has gone up by 77% from the figure predicted three months ago; to reach 983 koz. This is due to an expected total supply that is 1% lower than the already weak level of 2022, at 7,193 koz (-63 koz), and stronger year-on-year demand growth of 28% to reach 8,176 koz (+1,775 koz).

The Demand for investments has significantly increased, topping 400 Koz in Q1’23. This increase in Demand may be ascribed to the unpredictability of the global market, the rapid expansion of platinum consumption, and worries about the supply risks associated with mines. Investment in bars and coins increased significantly in Q1 of 23 (71% YoY), hitting 102 Koz, the highest level since Q3 of 21. The recovery in Japan served as fuel for the rise. With a predicted growth of 79% (+178 Koz), this trend is anticipated to last the entire year. Additionally, in Q1’23, platinum ETF holdings rose by 43 Koz, reversing the net disinvestment of the previous six quarters. Instead of PGM mining stocks, South African funds are once again interested in holding platinum ETFs. In 2023, it’s anticipated that this pattern will persist, leading to a net investment demand of 433 Koz and a swing of 1,073 Koz in 2022.

Industrial platinum demand has grown by 8% (+43 Koz) in Q1’23, primarily driven by the 108% (+123 Koz) growth in chemical demand due to paraxylene capacity additions in China. The increase in LCD glass capacity in China is expected to offset the closures in Japan, resulting in a 76% YoY growth (+316 Koz) in the demand for platinum in glass to 730 Koz. The medical sector (+3%, +9 Koz) and other industrial segments (+4%, +23 Koz) have also contributed to the growth in industrial demand. As a result, 2023 is anticipated to be a record year for industrial demand, growing by 17% YoY (+382 Koz) to 2,628 Koz.

Despite a weak macro outlook, the Demand for platinum in the automotive industry has seen a significant rise. In Q1’23, the demand increased by 9% (+69 koz) to 806 koz, primarily due to increased platinum usage per vehicle and partially due to higher vehicle production. Every year, it is expected that the global automotive demand for platinum will increase by 12% in 2023, reaching 3,255 koz (+357 koz YoY), driven by factors such as heavy-duty vehicle production growth of 6% in 2023, tighter emissions legislation, and a growing preference for platinum over palladium in gasoline after-treatment systems. This preference has led to an upward revision of the substitution estimate for 2023 to 615 koz.

However, the total supply of platinum struggling in 2023. Refined mine production declined by 8% (-96 koz) YoY in Q1’23 and fell by 11% (-151 koz) against Q4’22. The output in South Africa declined by 14% (-119 koz) YoY due to smelter maintenance and the country’s ongoing electricity shortages. Mined platinum supply is expected to fall by 1% (to 5,511 koz) in 2023, although gains in North America and Zimbabwe partially offset the reductions in South Africa. Nevertheless, uncertainties exist for the South African platinum supply.

The global recycling of platinum remained sluggish in Q1’23, falling by 12% (-56 koz) YoY to 413 koz due to reduced volumes of end-of-life vehicles and regulatory measures in North America aimed at curbing autocatalyst theft. As these issues are likely to persist throughout 2023, the full-year platinum recycling supply is forecasted to fall by 1% (-9 koz) to 1,682 koz.

Platinum Long (Buy)
Enter At: 932.6
T.P_1: 954.0
T.P-2: 979.2
T.P_3: 1007.7
T.P_4: 1029.7
T.P_5: 1053.9
T.P_6: 1089.7
T.P_7: 1118.9
T.P_8: 1150.2
T.P_9: 1183.9
T.P_10: 1242.3
T.P_11: 1297.6
S.L: 761.6

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