- Global platinum deficit for 2023 exceeds 1 million ounces.
- Automotive and industrial sectors driving increased platinum demand.
- Zimbabwe's platinum supply increases, offering opportunities in the global market.
Platinum, a precious metal with a wide range of industrial applications, is experiencing a significant deficit in global supply. The latest report from the World Platinum Investment Council (WPIC) reveals that the deficit forecast for 2023 has now exceeded 1 million ounces, driven by robust demand growth in the automotive and industrial sectors and stagnant supply levels. This presents a unique opportunity for countries like Zimbabwe, which has seen a slight increase in platinum supply amid challenges faced by other major producers. Zimbabwe exports nickel mattes largely composed of platinum and palladium worthy about US$1.5 billion.
The automotive industry, a key consumer of platinum, is expected to drive the surge in demand. In the second quarter of 2023, platinum demand in the automotive sector rose by 19%, equivalent to 136,000 ounces. This growth is attributed to the easing of the semiconductor shortage, leading to higher vehicle production worldwide. Notably, the production of light-duty vehicles (LDVs) increased by 14% year-on-year, while heavy-duty vehicle (HDV) production saw an 18% surge. Additionally, China's adoption of tighter emissions standards for HDVs will further boost platinum demand as platinum group metal-coated particulate filter systems become mandatory.
Industrial demand for platinum also witnessed a notable increase in the second quarter of 2023, reaching its highest level since Q3 2021. The chemical industry, in particular, experienced an 87% year-on-year growth, driven by higher demand for platinum-bearing catalysts from the paraxylene sector. Looking ahead, the forecast for industrial demand in 2023 has been revised upward to a record-breaking 2,667,000 ounces, primarily due to capacity expansions in the glass and chemical applications.
Investment demand for platinum remains strong, with net positive investment demand reaching 154,000 ounces in the second quarter of 2023. Platinum ETF holdings experienced their largest quarterly increase since Q3 2020, growing by 155,000 ounces. Although global bar and coin investment declined in the second quarter, it is expected to bounce back and contribute to a 45% year-on-year increase in 2023, driven by renewed interest from Japan.
While demand for platinum continues to soar, total supply remains constrained. Refined mine production declined by 4% in the second quarter of 2023, mainly due to a decline in South African output. Although South Africa's platinum supply improved compared to previous quarters, it still experienced a 9% decline year-on-year, primarily due to processing-asset maintenance and electricity shortages. In contrast, Zimbabwe's platinum supply increased by 2% year-on-year, reaching its highest level since Q4 2021. This positive development can be attributed to higher output from Zimplats, facilitated by a power import agreement with Zambia.
The growing deficit in the global platinum market presents significant opportunities for countries like Zimbabwe, which possesses substantial platinum reserves. With increased output and favorable trading conditions, Zimbabwe can capitalize on the surging demand and contribute to narrowing the supply gap. Furthermore, the country's partnership with Zambia to mitigate the impact of electricity shortages demonstrates its commitment to maintaining a stable supply.
The widening deficit and the diminishing availability of above-ground platinum stocks have further strengthened the investment case for platinum. Investors seeking exposure to the metal can find potential value in its role within the hydrogen economy, particularly in the production of green hydrogen through platinum-containing electrolysers. While platinum's contribution to the hydrogen economy remains relatively small in 2023, it is expected to grow substantially in the medium term, making it an attractive investment option for those interested in global decarbonization efforts.
As the global platinum deficit reaches record levels, Zimbabwe and other platinum-producing nations have an opportunity to leverage their resources and contribute to meeting the rising demand. However, it is crucial for these countries to address challenges such as electricity shortages and ensure sustainable mining practices to fully capitalize on the favourable market conditions. With the deficit forecast for 2023 surpassing all previous records, the platinum market presents a promising landscape for Zimbabwe, Africa, and the world at large, offering potential economic growth and investment opportunities.
-Equity Axis News