Platinum market Initial 2023 forecasts
Some of the themes that have characterised 2021 and 2022 are expected to continue into 2023, but dramatic changes are expected to manifest in other areas that result in the platinum market pivoting from surplus to deficit. Both mining and recycling supply are expected to continue to face headwinds, whilst demand is forecast to grow strongly from increasing platinum for palladium substitution in gasoline vehicles, jewellery demand staying largely flat, industrial demand remaining strong despite the challenging economic environment and investment demand turning positive.
The swing from negative to positive bar and coin demand in Japan is forecast to push total bar and coin demand to its third strongest year in our time series, ETF disinvestment is anticipated to slow significantly, and only very limited exchange stock outflows are projected. Mining supply has been beset by operational challenges in 2022, which are expected to remain a feature through 2023.
South Africa’s struggles with load shedding, which increased significantly quarter-on-quarter, are expected to continue to negatively impact refined metal output for the foreseeable future. Whilst output from Russia is currently forecast to remain flat year-on-year in 2023, nor nickel has cautioned of risks to future production levels as it struggles with sanctions and it has consequently withdrawn guidance.
Recycling supply’s challenges with scrap availability are expected to ease somewhat in 2023, but recycling supply is still expected to remain 11% below pre-Covid levels. Mine supply for 2023 is projected to total 5,726 koz (+1% year-on-year) and recycling supply to come to 1,740 koz (+4% year-on-year) for total supply of 7,466 koz (+2% year-on-year).
The big risk to platinum demand in 2023 is the weak economic outlook eroding consumer demand for goods that contain platinum or are reliant upon platinum for their manufacture. Addressing this, it is worth noting that automotive production remains constrained below levels that would be normal for prevailing economic activity, jewellery demand is expected to be supported by fewer Covid lockdowns in China than in 2022, and industrial demand is characterised by capacity additions that have already been financially and physically committed to.
Although the production of pure internal combustion vehicles (ICE) is expected to contract by 5% in 2023, production of hybrid vehicles and heavy-duty vehicles, which are more platinum intensive vehicle categories, is forecast to increase by 15% and 11%, respectively. Total automotive demand is expected to increase 11% year-on-year to 3,288 koz in 2023, including 500 koz of platinum substitution for palladium.
Jewellery demand for platinum is expected to be flat at 1,954 koz (+1 koz year-on-year) in 2023 as fewer COVID lockdowns in China and the price differential to gold support demand. Forecast industrial demand of 2,316 koz in 2023 (+10% year-on-year) is projected to be one of the strongest years in our time series, second only to, and only 5% below, the record year of 2021.
Industrial demand is to be led by glass capacity additions in China and Egypt, with total glass demand of 481 koz (+52% year-on-year), coupled with continued strong chemical, medical and other demand, more than offsetting weaker outlooks for the petroleum and electrical sub-sectors. In terms of investment demand, bar and coin is expected to increase by 49% to 507 koz, primarily due to a swing from negative to positive investment demand in Japan, but also due to improved product availability in North America and Europe.
ETF disinvestment is expected to continue, but at a much lower rate than in 2022, while further significant exchange stock outflows are not expected to occur. In aggregate, investment demand is expected to total 212 koz, a 737 koz positive increase in demand from 2022. The net impact is for the platinum market to move into a deficit of 303 koz in 2023, a change of more than 1.1 Moz from the projected 2022 surplus.