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Demand for platinum in a state of flux

A German high court has ruled that cities will be allowed to ban diesel cars, a move that would affect about 12 million cars complying with Euro 5 and earlier emissions standards. Consequently, the demand and price for platinum, the main autocatalyst metal in diesel vehicles, is expected to take a hard hit.

Palladium however, used in petrol cars, is expected to gain in value and volumes. This is according to a statement issued by Afriforesight Commodities, the largest independent commodity and cost research house in Africa.

These movements could reverse over the medium term as some automakers opt to replace palladium with the now cheaper platinum in petrol cars, as both metals perform the same function in petrol autocatalysts the statement also notes.

Despite this development, the World Platinum Investment Council predicts that overall demand for platinum is forecast to increase by 2% in 2018 compared to the full year 2017.

It also notes that supply is predicted to fall by 1%, due in part to a 2% reduction in South African mine supply compounded by closures in the second half of 2017.

The global platinum jewellery market is also predicted to recover by 3% in 2018, buoyed by double-digit growth in the rapidly expanding Indian market, with demand from China currently expected to stabilise. 2018 is predicted to see the first annual increase in platinum jewellery demand since 2014.

After a tough 2017, industrial demand is expected to rebound by 9% in 2018, largely driven by increasing demand from the petroleum and glass sectors.

Recycling supply is predicted to increase by 2%, however, the Council warns that the increasing complexity of autocatalysts is making recovery of the metal increasingly tough.

Investment demand is predicted to remain flat at 250 000 oz for 2018, in line with a conservative approach to assessing future demand from the sector.

Paul Wilson, CEO of the Council commented: “2017 [was] undoubtedly been a challenging year for the platinum market, but our independent forecast of the fundamental supply and demand drivers for 2018 shows a new, more positive picture emerging. In particular, jewellery demand is expected to return to growth for the first time in four years in 2018. Industrial demand was weak in 2017, but will sharply rebound in the coming year.”