Platinum demand for Q3 and full-year 2022
Total Q3 supply was down 12% (-232 koz) year-on-year at 1,748 koz, with mine supply remaining constrained by operational hallenges including power shortages in South Africa and recycling supply limited by scrap availability. Total mine supply was down 11% year-on-year (-171 koz) with Anglo American Platinum’s output negatively impacted by the rebuild of the Polokwane smelter, and Sibanye Stillwater’s Stillwater mine in Montana continuing to face operational challenges, in part due to the flooding earlier in the year.
Recycling was down 13% (-61 koz) year-on-year due to a continued shortage of scrapped autocatalysts, as well as less jewellery being sold back in China. Both the mining and recycling constraints are themes that are expected to continue through the end of the year and into 2023, with total supply for 2022 expected to be down 10% on 2021 at 7,306 koz.
Automotive demand for platinum was flat quarter-on-quarter, but up 25% year-on-year as supply chain challenges began to ease. This momentum is expected to continue through the fourth quarter, resulting in projected 2022 automotive demand for platinum of 2,964 koz being up 12% year-on-year. The projections for platinum for palladium substitution in 2022 remain unchanged at 340 koz.
Jewellery demand was down 3% quarter-on-quarter with continued weakness in China offsetting continued strength in demand from North America, Europe and India; but it is expected to remain flat year-on-year for 2022 as a whole, albeit still well below historical levels. Industrial demand improved 10% year-on-year in Q3’22 to 553 koz. Industrial demand for 2022 as a whole is expected to total 2,110 koz, down 14% from 2021, which was a record year; the forecast is for 2022 to still be the third strongest year for industrial demand since 2013.
For the fifth quarter in a row, the dominant demand driver in Q3’22 was continued negative ETF demand and exchange stock outflows, which combined totalled -369 koz, partially offset by positive bar and coin demand of 97 koz. In a rising interest rate environment there is an opportunity cost associated with ETFs as holders must pay the annual ETF management fee and are also forgoing the interest receivable on a comparable cash deposit.
As a result, investors looking for yield may choose to rotate out of ETFs into owning physical metal that they can lease out to increase their return. This may be a factor behind some of the ETF disinvestment seen since the middle of 2021. Turning to exchange stocks, the outflows have been driven by tight physical market conditions, but with stocks having now fallen to historically normal levels, limited further outflows are expected.
Bar and coin demand for 2022 is forecast to total 340 koz. This includes 45 koz of net disinvestment in Japan; although Japanese demand did turn modestly net positive in Q3’22 and is expected to remain positive into 2023. Total investment demand in 2022 is expected to come to negative 525 koz including 865 koz of ETF and exchange stock outflows, partially offset by net positive bar and coin demand.
In terms of the platinum market’s supply/demand balance, the net result is a Q3’22 platinum surplus of 263 koz and a forecast full-year 2022 surplus of 804 koz. This implies Q4’22 excess supply of 67 koz, which would be the smallest quarterly surplus of 2022 and potentially indicating a change in market direction. In Q3’22, as was seen in H1’22 and in 2021 as a whole, continued strong China platinum imports in excess of identified demand appear to have continued to attract metal away from Western vaults and into China.