JOHANNESBURG – The World Platinum Investment Council (WPIC) yesterday warned that operational disruptions in South Africa’s platinum mines could likely materially reduce 2019 supply, as it predicted that a surge in investment demand had stunted expectations of a large surplus in the platinum market this year.
In its latest Platinum Quarterly, released yesterday, the WPIC said potential power disruptions and industrial action represented risks that could materially reduce South African mining supply during the year.
It predicted 2020 refined production to be significantly below the 2019 level.
“The 2019 forecast allows for similar operational disruptions in South Africa to those experienced in 2018. Consequently, potential power disruption and industrial action represent risks that could materially reduce actual 2019 supply,” it said.
South Africa, which is the biggest producer of platinum, is bracing itself for the beginning of wage talks next month.
The WPIC was created in 2014 by leading South African platinum producers to stimulate demand predicted a narrowing surplus for 2019 due to strong investment demand.
It said it now expected 2019 to reduce to a 375000 ounces surplus from the prior estimate of 680000 ounces, due to a strong increase in investment demand that had more than offset slightly lower automotive, jewellery and industrial demand compared to 2018.
WPIC chief executive Paul Wilson said the report showed significant investment demand growth – an indication that platinum demand growth potential was finally outweighing long-standing negative sentiment.
“The market may have previously underestimated the significant positive impact on platinum demand likely as more platinum is used in emissions control in petrol cars and the prospect of more clean new diesels on the road,” Wilson said.
The WPIC also said platinum demand in the first quarter of 2019 had increased by 32percent to 2.56 million ounces, owing to a surge in investment demand.
“Investment demand increased to 765000 ounces, mostly due to a significant increase in exchange traded fund holdings, which gained 690000 ounces, the largest quarterly increase yet seen,” it said.
Total demand this year is forecast to rise 8percent compared to 2018, it said, while refined platinum production had increased by 18percent year-on-year to 1.52million ounces in the first quarter of 2019.
South African output climbed by 21percent year-on-year to 1.1million ounces, it said.
The improved investment growth comes as platinum group metals miners’ equities, which are listed in South Africa, had performed very strongly in the second half of 2018.
The strong price of palladium, which is a sister metal to platinum, has comes amid the increasing palladium demand from the introduction of more stringent emissions limits in China and limited short-term palladium supply growth.
Anglo American Platinum chief executive Chris Griffith said that he was “bullish” on both platinum and palladium. He said he expected a price pull back in palladium, because of underlying fundamentals.