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Platinum or testing $1000 in 2015, with the degree of supply shortage expected to ease
Release time:
22 May,2015
In a report released on Thursday, May 14, analysts at Thomson Reuters GFMS stated that the price of platinum could potentially test $1,000 per ounce this year, a level unseen since early 2009, due to increased supply from South African mines and global autocatalyst recyclers.
Spot platinum has fallen 35% over the past five years. The average price in 2015 is projected to be $1,170 per ounce. Increased supply has reduced the platinum market deficit to 670,000 ounces.
“Price movements from current levels will be upward, towards $1,290,” GFMS stated in its annual platinum and palladium survey. “However, upside potential will be limited, and we would not be surprised if platinum prices tested $1,000 this year.”
“This bearish view is based on increased supply; more specifically, an expected 22% increase in output from South African mines and a projected 10% increase in autocatalyst scrap.”
In 2014, the platinum market deficit reached 1,016,000 ounces due to a five-month strike that caused South African platinum miners' output to fall to a 15-year low.
GFMS indicated that strike action, coupled with slow capacity increases in the period following the resolution of disputes, reduced platinum market supply by 1,360,000 ounces. The moderate recovery in demand from a four-year low in 2013 also exacerbated the market deficit.
Demand this year is expected to rise to an eight-year high of 7,720,000 ounces, primarily supported by growth in the automotive and glass industries. Last year, autocatalyst demand saw a small increase of 3.6%.
However, GFMS stated that the platinum market could see a surplus in 2016 if production is not cut.
“Unless production cuts are achieved through the permanent closure of high-cost mines, the platinum market is expected to return to surplus next year,” said William Tankard, GFMS's head of mining research.
“If you believe prices will rebound in the short to medium term…then it will be a huge challenge for producers to make that decision.”
Jewelry demand in 2015 is expected to increase by 4%, and retail investment demand is expected to grow by 20%, as prices fall towards the bottom of this year's projected range.
Palladium is expected to remain stable at $800 per ounce this year, but the outlook is more positive, as stricter emission standards and expected autocatalyst demand are expected to keep the market in a deficit.
Last year, the palladium market had a deficit of 2,176,000 ounces, mainly attributed to the South African strike.
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