Source: Zhitong Finance

The World Platinum Investment Committee (WPIC) said that as the slowing electric vehicle boom supports demand for automotive catalysts, the platinum market will still be in short supply this year. WPIC said in a report on Monday that demand for metals in pollution control equipment climbed to its highest level since 2017 in the first quarter, and is expected to grow by about 2% for the whole year. In addition to slowing demand for electric vehicles that do not require catalytic converters, factors such as stricter emission regulations and alternatives to metallic palladium are also helping consumption.

Edward Sterck, the committee's head of research, said: “Investors are saying, in fact, we probably won't be running all Tesla by 2030. So that means there will be more internal combustion engine cars, more hybrid cars. As a result, these commodities seem seriously undervalued.”

The weakness of platinum group metals in recent years has hurt the earnings of South African mining companies and triggered layoffs. However, the price of platinum has risen slightly in the past few months, surpassing the sister metal palladium for the first time in five years, as automakers replaced these two metals. According to WPIC, demand for platinum will exceed supply of 476,000 ounces this year, which is the second consecutive year of shortages. Although the trend of replacing palladium with platinum is expected to continue, the association warned that given the weakening prospects for palladium, this trend could be reversed within about two years.

Here are some other key 2024 platinum data from the report: the increase in supply from recycling will be offset by a decline in mining production; surface stocks are expected to drop by 12%. As investors withdraw from ETFs in the context of high interest rates, investment demand is expected to drop 69% this year; however, once the Federal Reserve cuts interest rates, these funds should flow back. “Supply is limited, but demand for industrial and automotive applications is quite strong,” Sterck said.

International chemical giant and automotive catalyst manufacturer Johnson Matthey (Johnson Matthey) also said in a report on Thursday that as Russian shipments return to normal from last year's high and industrial demand remains strong, the platinum market will face the biggest supply gap in 10 years in 2024. All platinum group metals (PGMs) — platinum, palladium, and rhodium — are expected to remain in deficit in 2024, the company said.

These three metals are used in automotive catalysts to reduce emissions from automobile engines, and platinum is also used in other industries, jewelry, and investments. Zhuang Xin Wanfeng said that the gap in the platinum market is expected to increase from 518,000 ounces in 2023 to 598,000 ounces this year. The agency expects demand for platinum to stabilize at around 7.61 million ounces, with slight declines in automobiles and jewellery being offset by increased investment. Zhuangxin Wanfeng said that consumption in the automotive industry is expected to fall by 1.3% in 2024, while the main supply is expected to fall by 2%, as Russian shipments return to a more normal level after a massive sell-off of mining stocks in 2023.

Zhuangxin Wanfeng said that car usage of palladium will drop by about 7%, reducing total demand to 9.73 million ounces, and the market gap to 358,000 ounces from 1.02 million ounces last year. As for rhodium, automobile consumption is also expected to drop by around 6%, reducing total demand by 4% to 1.06 million ounces. Zhuangxin Wanfeng said that the rhodium market may supply less than 65,000 ounces, down from 125,000 ounces in 2023.

“During the 2020-2022 period, automotive and industrial users purchased more metals than they needed to mitigate price and supply risks,” said Johnson Wanfeng's head of market research. Since then, consumers have been using up excess PGM inventory, and some have even sold the metal back to the market.”