Power cuts, war and hybrid cars predicted to increase

value of platinum Growth is projected to increase this year due to factors including power cuts in South Africa, the war in Ukraine and increased production of hybrid cars.

Investment bank UBS readjusted its price forecast for platinum in 2023, forecasting that the price of the precious metal will hit $1,150 an ounce for June, up from a previous estimate of $1,100, and $1,200 an ounce for December. Will reach The precious metal was priced at $1,004.90 an ounce at the time of writing.

“After a strong rally at the start of the year, rising US interest rates exacerbated growth concerns and a stronger US dollar weighed on platinum,” UBS said in a research report last month.

“We recommend investors with high risk appetite to add or sell downside risk,” the report said.

Platinum notched its best quarter since 2008 in December when it rose more than 26% to $1,086 per troy ounce compared to the start of the three-month period.

According to the World Platinum Investment Council, there will be a “deeper-than-expected” global shortage of platinum in 2023 as demand rises and supply struggles to keep up.

After a global surplus of the precious metal for the past two years, the council forecasts a deficit of 556,000 ounces (556 koz) this year.

In 2022, WPIC recorded a 776,000-ounce surplus, but supply is set to exceed demand in 2023, creating a “meaningful shortage,” according to Ed Stirk, director of research at WPIC.

“The key point is we are expecting 24% year-over-year growth in terms of aggregate demand,” Sterk told CNBC, but supply is only set to grow 13% compared to last year.

“On the demand side of the equation, we think [platinum is] Very well protected from economic uncertainty,” Stirk said, while a number of factors feed into the “constrained outlook” on the supply side.

supply issues

Refined mine supply of platinum is set to fall 18% year-on-year in 2022, according to WPIC, with South Africa and Russia seeing the biggest reductions.

South Africa normally accounts for more than 70% of the world’s platinum mining supply, according to UBS, but this process has been restricted by the country’s deep power crisis. WPIC projects a 24% year-on-year drop in the country’s production in 2022, and anticipates continued volatility that will leave mining supply “largely unchanged” this year.

Russian supply is set to decline 10% year-on-year in 2022 as war-induced geopolitical tensions halt the transportation of platinum-rich products. WPIC estimates that international transportation issues will persist this year and that overall platinum production in Russia “will be down slightly, but remain strong.”

recycling recovery

Recycling is the other main source of platinum, but the global supply of recycled platinum is also set to decline in 2022. Cars were being driven longer due to reduced availability of new vehicles and changing consumer habits, the WPIC report said, while the amount of platinum-containing jewelry being scrapped also dropped last year. According to the report, weak jewelry sales in China “hampered sell-back activity”.

Recycled platinum supply will see some recovery in 2023, but the amount will remain below pre-pandemic levels, WPIC estimates.

rising demand

Platinum is becoming an increasingly important component in new cars, with the precious metal replacing palladium in catalytic converters. The metal helps in neutralizing harmful emissions in vehicles and hence stricter emission laws and growing popularity of hybrid vehicles only put more pressure on the demand for platinum.

According to WPIC, global automotive demand for platinum is expected to increase by 10% to 3.246 million ounces in 2023.

Jewelry is “probably the area of ​​greatest uncertainty” when it comes to platinum demand, Sterk told CNBC, but it’s a relatively small component in the picture.

According to WPIC demand is expected to increase, although only by 2% to 1.936 million oz. Global demand will be constrained by the impact of economic uncertainty on Chinese consumer spending and fears of a recession across Europe.

According to WPIC, industrial demand for platinum will increase by 12% year-on-year in 2023, with platinum use expected to increase, particularly in the glass and medical industries.

All factors considered, it is “relatively likely” that the platinum market is entering “a sustained and prolonged deficit,” Sterk told CNBC.