Key Points

• Supply deficit is widening
• Investment demand on the rise
• Auto-Industry consuming more platinum by the day
• Hydrogen technology to drive platinum even higher.

It could only be a matter of time before platinum prices start to rise as the precious metal is expecting to see a massive supply deficit this year spilling into 2021, according to the latest research from the World Platinum Investment Council (WPIC). In the latest third-quarter market report, the Council pointed out that Platinum is going to witness a supply deficit in excess of at least 1 million ounces this year due to the inability of miners to keep up with growing demand. Looking at next year, the platinum market is expected to see a supply deficit of more than 200,000 ounces.

“Despite the strong quarter-on-quarter recovery in mine and recycle supply, the unexpected rebound in automotive demand in the western economies and sustained strong investment demand for precious metals, including platinum, lifted 3Q20 platinum demand well above supply,” the WPIC highlighted in a press release. “Regardless of the strong recovery of supply and demand in the third quarter of 2020, when compared to the second quarter, overall weak supply and very strong investor demand were the main contributors to the deficit in the quarter,” the report noted.

The report indicated that the total platinum supply in 3Q20 was down by 5% from 3Q19; however, a relative decline if compared to the 36% drop in 2Q20. Meanwhile, total mine supply grew by 4% in the third quarter, compared to 2019. However, mine supply is expected to fall 21% this year due to various factors which include the negative effects of the novel coronavirus on mining activities.

The platinum market might not be able to sustain the current pace of demand growth, especially when it comes to investment demand, therefore market still has plenty of room for higher prices. The role that platinum is playing in green technology, particularly hydrogen-powered vehicles will guarantee continued demand for the metal. This is derived from the fact that Platinum remains the cheapest option when it comes to the manufacturing of auto-catalytic convertors.

The platinum market is also being driven by investment demand, Exchange Traded Fund demand reached a million ounces of platinum, and ETF demand continues to grow. Investors are concerned with various economic fundamentals which are eroding the value of fiat currencies, ultra-low yields on various assets. These and other factors have prompted the rise in the demand for metals backed assets. From a long-term perspective, the precious metals market is far from saturated.