London - The platinum market is expected to see a shortfall of 885,000 ounces this year, a report by the World Platinum Investment Council (WPIC) estimated on Wednesday, as a strike in major producer South Africa reduced supply.
The above-ground stocks of the metal that have helped cushion prices from the impact of the tightening market are expected to have declined significantly. Platinum prices are down 11 percent this year despite a third straight yearly deficit.
The WPIC, which commissioned the report from consultancy SFA (Oxford), said it sees above-ground platinum inventories, excluding exchange-traded funds, metal held by exchanges, and industry working inventories, at 2.56 million ounces at year-end.
That is down from 3.445 million ounces at the end of last year, it said.
Mined platinum output from South Africa, the source of three-quarters of mined supply of the metal, is forecast to fall 31 percent this year. The Association of Mineworkers and Construction Union (AMCU) led a five-month strike among platinum miners in the republic early this year.
Overall platinum supply is forecast to fall 9 percent to 7.125 million ounces this year. Refined production is likely to be higher in 2015 as South African mines recover, the report said, though it is unlikely to return to 2013 levels.
Demand is also expected to fall, largely on the back of a drop in investment.
Platinum investment volumes, which rose sharply in 2013 after the launch of Absa Capital's NewPlat exchange-traded fund in South Africa, are forecast to decline 82 percent this year.
The two largest elements of demand - offtake by jewellers, and buying by carmakers, who use the metal in catalytic converters - are both forecast to rise, however.
Autocatalyst demand, chiefly from carmakers in Europe, is expected to climb 5 percent, the WPIC said.
“2014 is a key year, particularly for Europe,” Beresford Clarke, head of research at SFA (Oxford), said. “We have just had Euro VI emissions legislation promulgated from September, and obviously the catalyst producers and carmakers alike have been preparing for that.
“The bottom line is a major reduction in nitrous oxide for Euro VI, and with that, you need higher platinum loadings.”
Jewellery demand is expected to rise 4 percent this year. Jewellery buying from China, which accounts for two-thirds of the global platinum jewellery market, is forecast to increase by 2 percent in 2014, and is expected to keep growing next year. - Reuters