The World Platinum Investment Council (WPIC) said, for the third consecutive quarter, platinum posted a deficit in Q4 2020 of 170 koz, as strong demand in automotive, industrial and jewellery sectors and sustained strong investment demand for platinum outstripped constrained supply.
Overall, despite a year that saw the global economy contracting by 3.5%, the platinum market deficit in 2020 was -932 koz, the largest on record. While total demand dropped by 7% (-569 koz), the sharp decline in mining supply of 20% (-1,203 koz) and the fall in recycling of 10% (-210 koz) contributed to total supply being down 17% (-1,413 koz).
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Against a backdrop of widespread vaccine programmes seeing economies return towards normal activity, platinum demand is forecast to increase by 3% (+254 koz) to 7,992 koz, while supply will recover 17% (+1,126 koz) to 7,932 koz resulting in a deficit of -60 koz in 2021, the third consecutive annual deficit.
The demand growth in 2021 is expected to be driven predominantly by strong recoveries in automotive, jewellery and industrial demand, offsetting reduced yet very strong investment demand.
Resurgent automotive sector
Platinum automotive demand in Q4 2020 grew 5% (+31 koz) year-on-year due to a healthy recovery in light-duty and heavy-duty vehicle production. North America in particular saw platinum demand increase 17% (+13 koz), including strong growth in light-duty diesel vehicles, helping to offset declines in other parts of the world.
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By GlobalDataHeavy-duty vehicle production meanwhile saw a 7% increase globally, spearheaded by China increasing by 21%. Heavier PGM-loaded catalysts which are needed to fully comply with the fast-approaching China VI legislation, contributed to a 51% (+29 koz) increase in platinum demand from this region.
Light-duty vehicle production is expected to recover in 2021, reaching levels just below those seen in 2019. Despite this slight shortfall, there is expected to be a 25% (+606 koz) increase in automotive platinum demand, mainly due to higher vehicle production, increased loadings to meet tighter emissions regulations and substitution of platinum for palladium in petrol after-treatment systems.
Paul Wilson, CEO of the World Platinum Investment Council said: "Having endured the dark days of the pandemic and global economic slowdown, we are now considering the possibility of the world returning to normal. The positive momentum in economic recovery of the latter part of 2020 is exhibited in the fact that activity has restarted, and platinum demand has rebounded in the automotive, industrial, and jewellery sectors.
"However, as we re-emerge from the pandemic, we now consider the role platinum has to play in global decarbonisation – one of the clearest global imperatives to emerge during the pandemic. Platinum is key to the production of green hydrogen and in fuel cells for electric vehicles, and this understanding among investors is rapidly increasing. As hydrogen availability rises and its production cost falls, due to accelerated global investment in decarbonisation, fuel cell vehicles are likely to require over 1m more ounces of platinum per annum within 10 years. In addition, platinum's rapidly accelerating substitution for palladium in autocatalysts will require over a million more ounces of platinum per annum within four years."
