(Bloomberg) -- The platinum market is expected to see its biggest annual deficit in at least a decade, but prices have so far been slow to react, according to an industry report.
A sharp rise in holdings by exchange-traded funds and strong growth in Chinese demand for large bars is forecast to help create a shortfall of more than 1 million ounces in 2024, according to a quarterly report from the World Platinum Investment Council. That comes after a deficit of 731,000 ounces last year.
“Even with deficits of this magnitude, the platinum price appears unresponsive,” said WPIC Chief Executive Officer Trevor Raymond. However, sentiment is shifting toward higher-for-longer automotive demand, which should help platinum’s strong underlying fundamentals play “a more prominent role,” he added.
Platinum has dropped about 30% from a peak in early 2021, while sister metals palladium and rhodium have posted much steeper drops amid uncertainty over demand from the auto industry, which uses the metals to curb emissions from diesel and gasoline vehicles. That’s dented the profitability of some higher-cost operations in South Africa, the biggest producer of platinum.
Holdings in platinum ETFs surged by 444,000 ounces during the April-June period — the highest quarterly inflow since 2020 — thanks to the precious metal’s relative under performance versus gold and strengthening fundamentals, the report said. Full-year gains are forecast to moderate to just 150,000 ounces, it said.
Chinese retail investment also more than doubled from a year earlier last quarter.
Total platinum demand is forecast to rise to 8.12 million ounces in 2024, also helped by a 7% gain from the jewelry sector. Overall industrial and automotive demand, which make up the bulk of the market, are both expected to nudge higher.
Meanwhile, total mined supply is forecast to fall 2% to 5.51 million ounces in 2024, as operations in South Africa are restructured and refined production declines in Russia, WPIC said. Above ground platinum stockpiles are expected to dwindle by 25% to about 3 million ounces.
“With the marked slowdown in the growth of battery electric vehicle market penetration rates and the normalization of palladium and rhodium prices, underlying fundamentals are expected to return to being the major platinum price setting factor going forwards,” said Edward Sterck, director of research at the WPIC.
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