Gross platinum demand rose by 2% in 2011 to 251.8 metric tons (mt) with growth in every sector apart from investment, according to Johnson Matthey in Platinum 2012, which was released during May. Supplies increased to a four-year high of 201.6 mt, supplemented by releases of in-process and refined inventories from South Africa in the second half, while recycling increased to 63.6 mt. As a result, the platinum market swung into oversupply of 13.4 mt.
Global supplies of platinum grew by 7% last year to 201.6 mt. Underlying mine production in South Africa fell by around 3.7 mt. However, releases of metal from inventories meant that total shipments from South Africa rose by 5% to 151 mt. A ramping up of mined output in North America following shutdowns in 2010, and new and expanding operations in Zimbabwe coming on-stream, together contributed significant additional output.
Gross platinum demand in vehicle emissions control grew by 1% to 96.6 mt. Purchasing of platinum in the heavy duty diesel sector increased by 27% to 16 mt last year. Much of this growth was due to pent-up demand for large trucks in North America as fleet operators returned to the market following the recession of 2009-2010. However, there was lower use of platinum in light duty emissions control due to substitution by palladium, as well as reduced buying by Japanese manufacturers in the wake of the Great East Japan Earthquake.
Purchasing of platinum for industrial applications rose by 17% to 63.6 mt. Recovery from the recession in developed markets and rapid growth in emerging ones drove a period of capacity building in a number of industrial sectors. In particular, demand for LCD panels in consumer electronics led to the installation of several new melting tanks in Asia, used in the manufacture of LCD glass.
Jewelry manufacturers bought 77.1 mt of platinum last year. In the second half, when platinum prices dropped and gold began to trade at a premium to platinum, there was a surge in buying by Chinese manufacturers, raising gross jewelry demand in China by 2% to 52.3 mt for the year as a whole. In India, an increase in retail outlets offering platinum and rising consumer purchases drove platinum jewelry demand up by a third to 2.5 mt.
Physical investment demand for platinum remained positive but was 30% lower than in 2010, at 14.3 mt. There was net investment into exchange traded funds, with inflows tending to coincide with periods of rising prices. Substantial purchasing of large platinum bars by Japanese investors once again occurred during price dips.
Recycling of platinum increased by 12% to 63.6 mt. Recovery of platinum from spent auto-catalysts rose by 4.4 mt to 38.1 mt last year as more highly-loaded catalysts from end-of-life vehicles were collected and refined. Stimulated by higher average metal prices, recycling of platinum in the jewelry sector rose by 10% to 25.2 mt.
The balance of the platinum market this year is expected to be similar overall to that in 2011. A comparatively low level of inventories in South Africa after the drawdowns of last year means that the industry has less flexibility to supplement platinum supplies with metal from stocks. Recent disruptions to underlying output from strikes and stoppages increase the likelihood of lower supplies in 2012. Flat auto-catalyst demand and more moderate levels of purchasing in cyclical industrial applications will lead to a slight fall in gross demand. The platinum market is forecast to remain in surplus in 2012, which is likely to keep the price in a range of $1,450/oz to $1,750/oz in the next six months, averaging $1,600/oz.
Platinum 2012 is Johnson Matthey’s latest free survey of the platinum group metals market. Readers can download the document at: http://www.platinum.matthey.com/publications/pgm-market-reviews/archive/platinum-2012/.