Johannesburg - The World Platinum Investment Council has warned that the supply deficit for the metal this year would be higher than previous forecasts.
Data from the council quarterly report, due to be released today, show a market deficit of 520 000 ounces for 2016, from 455 000 ounces forecast in the previous quarter. The council said it expected demand to be robust this year and mining supply to fall 3 percent, as recycling would probably decline 2 percent.
The council’s chief executive, Paul Wilson, said: “The overall picture for platinum in 2016, which has enjoyed a significant rebound in price over the course of the first half of the year, continues to be one of constraint and ultimately deficit - a deficit greater than forecast in the previous quarter.”
Forecasts
The report estimates above ground stocks of 1.87 million ounces, 55 percent lower from 4.1 million ounces predicted at the end of 2012.
“Not only has the stock level shrunk since 2012 - down more than 50 percent over the period - but positive sentiment has reduced the propensity of holders to sell platinum to meet deficits,” Wilson said. “We believe it is particularly worthwhile to consider the reduced likelihood of investor sales to meet deficits when considering this investment market in the medium term.”
The report said total mine supply in the second quarter rose 22 percent from the previous quarter as production from South Africa returned to more normal levels and refining resumed after safety related refinery stoppage in the first quarter at Anglo American Platinum.
“We continue to see little evidence to support rising output over the medium term. Platinum production from South Africa, the largest producer, has failed to reach the levels observed in 2013 and 2015,” the report said.
“Real cost increases due to labour costs - which account for over 50 percent of overall mining costs - continue and, together with low metal prices, they have driven the fall in capital investment across this industry. Sustaining current output is harder as a result,” the report added.
'Supply crunch'
Impala Platinum chief executive Terence Goodlace said last week that he expected a “supply crunch” in the longer term.
Northam Platinum chief executive Paul Dunne reportedly said he was convinced the world would begin to see the nature of the structural deficit looming in platinum as a result of diminishing primary supply from southern Africa.
Momentum SP Reid Securities analyst Sibonginkosi Nyanga said the data was in line with expectations from the market. Nyanga said there had been a rise in projection of global platinum demand to 8.255 million ounces.
He said the demand would be driven by strong investment demand, which was forecast to rise to 350 000 ounces this year and supported by booming demand in Japan while supplies remained stagnant.
“The headwinds of the mines’ sharp fall in capital spend is expected to start to weigh on the supply side,” Nyanga said.
“It’s public knowledge that platinum companies overexpanded during the commodities boom and have been suffering from an oversupply in the market,” Nyanga said.
BUSINESS REPORT