Platinum Prices Stagnate Despite Looming Supply Shortfall

Platinum

The global platinum market is headed for a significant supply deficit in 2024, yet prices for the metal, along with its sister metals palladium and rhodium, remain muted.

By Rudairo Mapuranga

According to the World Platinum Investment Council (WPIC), the demand for platinum will exceed supply by 1.03 million ounces this year, a sharp increase from the 476,000 oz deficit predicted in the first quarter.

Driving the demand surge are strong inflows into exchange-traded funds (ETFs), which recorded 444,000 oz in the second quarter, alongside a boost in jewellery sales, particularly in the US and Europe.

The automotive sector has also contributed to the demand rise, with a 1% increase to 820,000 oz in the second quarter, pushing projected automotive demand to a seven-year high of 3.24 million oz for 2024.

On the supply side, refined mine production grew by 4% in the second quarter, reaching 1.54 million oz, buoyed by a 7% increase in South African output.

However, the council predicts that South African production will fall by 2% for the year as costly operations are scaled back, bringing the total mined platinum supply to a four-year low of 5.51 million oz.

Despite these supply and demand dynamics, platinum prices have remained flat. “For a long time, price setting has been influenced more by sentiment than by supply/demand fundamentals,” said Trevor Raymond, CEO of the WPIC, referring to the lingering effects of the 2015 Dieselgate scandal and the decline in light-duty diesel vehicle sales in Europe.

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However, experts believe that a shift in market sentiment is inevitable.

“It’s difficult to say exactly when we’ll see the change, but the longer it takes, the more dramatic the response is likely to be,” said Ed Sterck, WPIC’s director of research. He pointed to dwindling above-ground stocks, projected to be at only four months’ supply by year-end, as a possible trigger for price movement.

The market may also be impacted by potential interest rate cuts from the US Federal Reserve. “It’s the expectation of rate cuts that matters,” added Sterck, noting that platinum ETFs, a non-yielding investment, would benefit from a lower interest rate environment.

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