Johannesburg - The World Platinum Investment Council (WPIC) forecast the sixth consecutive platinum market deficit for 2017 as it expected a 2 percent decline in both global demand and supply for platinum, which is used in catalytic converters, laboratory equipment and jewellery.
In a market with a deficit of platinum, prices should go up, because it involves demand outweighing production, but the WPIC said yesterday that a disconnection between the platinum price and its fundamentals remained.
Paul Wilson, the chief executive of WPIC, said that the WPIC Platinum Quarterly released yesterday forecast the market was set to remain in deficit in 2016 and 2017, marking the fifth and sixth consecutive years of deficits in the market.
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“The deficit for 2016 has been revised lower this quarter, reflecting a slowdown in retail jewellery sales in China, accentuated at the manufacturer level, due to the higher-than-expected levels of retailer jewellery recycling this year,” Wilson said.
However, Rene Hochreiter, a mining analyst at Noah Capital Markets, said in South Africa, platinum investment was likely to be subdued, considering the uncertainty over the mining charter and the “once empowered, always empowered” debacle.
The Chamber of Mines complained last week that the process to arrive at this draft reviewed mining charter had been seriously flawed.
The WIPC forecast comes a week after refiner Johnson Matthey said the platinum market could return to surplus for the first time in six years in 2017 amid the demand weakness in Chinese jewellery.
Johnson Matthey also expected the platinum market to grow marginally as lower output in South Africa was counterweighted by gains elsewhere and growth in recycling.
Hochreiter did not see that there would be a surplus next year, because of the enormous amount of new legislation that was in the pipeline.
“Trying to forecast supply and demand is always going to be a guessing game. It all depends on market demand,” Hochreiter said.
He said that the demand for car catalysts was here to stay, as “electric cars will not take away significant market share before 2030, if ever”.
The WPIC, which was formed two years ago by South Africa’s six leading platinum producers to develop the market, expected global platinum supply to decline 2 percent to 7.74 million ounces.
It also expected global demand to drop by 2 percent to 7.84 million ounces, with projected growth in jewellery demand unable to offset expected declines in automotive, industrial and investment demand.
The WIPC said automotive supply was expected to decline 1 percent in global automotive platinum demand to 3.36 million ounces next year.
South Africa, which accounts for 80 percent of the world’s platinum production, was forecast to raise production by 2 percent to 4.3 million ounces next year, the WIPC said.
South African supply was forecast to grow owing to the ramp up of two mines (most likely Wesizwe and Maseve) and two replacement shafts (the two Impala shafts), and the restoration of output from shafts that were temporarily closed last year.
BUSINESS REPORT