By Yusuf Khan
Supply and demand of platinum fell sharply during the first quarter of 2022 as constraints in mined supply from South Africa and geopolitical turmoil in Russia both slashed output and consumption of the precious metal.
Geopolitical upheavals and supply-chain disruptions heavily hit the platinum market, with supply falling 13% during the first quarter to 1.28 million ounces compared with the 1.46 million ounces a year prior, the World Platinum Investment Council said Monday.
The fall in demand was even more pronounced, dropping 26% on year to 1.52 million ounces from 1.7 million ounces. Quarter-on-quarter demand also declined sharply by 10%, led by weak industrial, jewelry and investment demand.
WPIC said that “security-of-supply concerns [are] likely to override near-term market balances in the wake of Russia’s invasion of Ukraine,” thanks in part to Russia’s importance to the global supplies of palladium and platinum, with the country accounting for 40% mined supply of the former and 10% of the latter.
Additionally, concerns about supply from long-term offtake agreements from Russia are a worry because of potential non-performance from both sides.
WPIC cut its outlook for the full year, with the total surplus projected to fall to 627,000 ounces from 652,000 ounces, which is roughly half of 2021’s surplus.
Mining supply challenges are to be expected further going forward this year, with three major South African producers all lowering production guidance, compounded by Covid-19 absenteeism, labor negotiations as well as two major producers in the region performing maintenance on key refining assets.
Production from Russia’s Nornickel has also been cut due to supply-chain challenges from sanctions on the country. In particular, Nornickel’s ability to source mining equipment and consumables from Western suppliers was of concern, bringing the global mine forecast for 2022 to 5.8 million ounces, down 7% on year.
Automotive demand remains a bright spark for platinum demand, with WPIC forecasting 3 million ounces to be consumed this year, a rise of 16% from 2021. This comes despite production constraints as a result of the continuing chip shortage, Russia-Ukraine war and rising palladium substitution in autocatalysts.
Given the uncertainty within the platinum-group-metals sphere, investment demand remained weak through the first quarter, falling by 167,000 ounces, although 105,000 ounces of this came from a single source, WPIC said. For the year as a whole, bar and coin demand is forecast to decline by 23%.
In a call, WPIC Director of Research Trevor Raymond said “the surplus of 627,000 ounces does look like it is quite easy to go from surplus to a deficit this year.”
Mr. Raymond highlighted that changes to the volume (loadings) of platinum or palladium could change within automotives depending both on price and availability, as well the entirety of Russia’s supply coming under scrutiny, further adding pressure to global platinum supply.
Write to Yusuf Khan at [email protected]
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