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A Shift in Platinum and Palladium Fortunes
Three industry reports released on Monday predict an upswing in the global platinum market due to mounting demand from the automotive sector, industrial usage, and investors. This increased demand is expected to create the largest platinum deficit in years.
These reports highlight a significant change in the market dynamics of platinum and its sibling metal, palladium. Both metals are primarily utilized in vehicle exhaust systems to reduce harmful engine emissions. While palladium has experienced high demand and undersupply, driving prices up, platinum has been characterized by weaker consumption and greater supply, keeping prices low.
Platinum Deficit Surpasses Palladium
Two reports released on Monday anticipate that while the palladium market will continue to experience a deficit this year, the undersupply of platinum will be more substantial.
The automotive industry is increasingly favoring platinum over palladium as a cost-saving measure. Additionally, the production of heavy-duty vehicles, which heavily rely on platinum, is on the rise, and the growth of electric vehicles is starting to challenge the palladium-dominated light vehicle market.
Platinum Demand on the Rise
Platinum is also bolstered by its use in industry and jewelry, while palladium's demand is almost solely tied to the automotive sector. In recent months, palladium prices have taken a sharp downturn, while platinum shows signs of recovery.
Johnson Matthey (LON:JMAT), a specialist materials manufacturer, predicts that the approximately 8 million ounces per year platinum market will face an undersupply of 128,000 ounces this year. This is the first deficit since 2020 and represents a significant turnaround from last year's surplus of 740,000 ounces.
Platinum Deficit Predictions
Both the World Platinum Investment Council and Metals Focus consultancy are predicting an even larger platinum deficit. The former anticipates a 983,000-ounce deficit, the largest since at least 2014, following last year’s surplus of 854,000 ounces. Metals Focus projects a 953,000-ounce deficit, a sharp increase from a mere 53,000 ounces in 2022.
These forecast variations are due to slightly different methodologies, with Metals Focus excluding platinum transactions by exchange-traded funds.
Supply Predictions and Market Comparisons
While JM expects an increase in both platinum and palladium supply this year, Metals Focus and the WPIC do not share this outlook.
In the approximately 10 million ounces per year palladium market, JM predicts a deficit of 43,000 ounces this year, down from 531,000 ounces in 2022. Metals Focus, however, sees the deficit rising to 707,000 ounces from 547,000 ounces last year.
The following is a breakdown of Johnson Matthey's report, which includes specific numbers and comparisons for platinum, palladium, and rhodium markets in 2022 and 2023.
PLATINUM (THOUSANDS OF OUNCES)
2022 vs 2023 % change
SUPPLY
Primary supply (mined) 5,530 5,808 5%
Secondary supply (recycled) 1,468 1,521 4%
TOTAL SUPPLY 6,998 7,329 5%
DEMAND
Automotive 2,762 3,063 11%
Chemical 699 697 0%
Dental & biomedical 253 257 2%
Electrical & electronics 235 266 13%
Glass 594 565 -5%
Investment -565 283
Jewellery 1,344 1,351 1%
Petroleum 230 213 -7%
Pollution control 223 260 17%
Other 483 502 4%
TOTAL DEMAND 6,258 7,457 19%
Movement in stocks 740 -128
PALLADIUM (THOUSANDS OF OUNCES)
2022 vs 2023 % change
SUPPLY
Primary supply (mined) 6,307 6,556 4%
Secondary supply (recycled) 3,099 3,234 4%
TOTAL SUPPLY 9,406 9,790 4%
DEMAND
Automotive 8,449 8,251 -2%
Chemical 589 534 -9%
Dental & biomedical 186 171 -8%
Electrical & electronics 544 545 0%
Investment -109 25
Jewellery 87 88 1%
Pollution control 108 123 14%
Other 83 96 16%
TOTAL DEMAND 9,937 9,833 -1%
Movement in stocks -531 -43
RHODIUM (THOUSANDS OF OUNCES)
2022 vs 2023 % change
SUPPLY
Primary supply (mined) 695 724 4%
Secondary supply (recycled) 338 345 2%
TOTAL SUPPLY 1033 1069 3%
DEMAND
Automotive 953 947 -1%
Chemical 66 82 24%
Electrical & electronics 5 6 20%
Glass -41 5
Other 15 15 0%
TOTAL DEMAND 998 1055 6%
Movement in stocks 35 14
