The platinum market has remained in deficit for a fifth consecutive year, with lower South African supplies, according to a new report from Johnson Matthey, global leaders in sustainable technologies.
Despite the deficit, the gap between supply and demand narrowed significantly, to just over 200,000 oz.
This comes at a time where sales from Russia and Zimbabwe were much higher than expected.
Primary supplies of platinum were little changed in 2016, at 6.10 million oz. Shipments from South Africa declined by 4%, as net destocking by platinum producers fell sharply after two years of significant stock sales, but the expected fall in Russian deliveries did not materialise.
Output at Norilsk Nickel was supplemented by shipments of platinum from stocks of refined metal accumulated during 2015, leaving Russian supplies up 8%. Shipments by North American and Zimbabwean producers were also supported by the release of metal from in-process and refined stocks.
The report has estimated that South African producers sold a net 70,000 oz of platinum from inventory last year, which represents a steep fall compared to the 2014–2015 period during which it estimated that at least 650,000 oz of metal were supplied from stocks.
Nevertheless, producers continue to mobilise their inventories where possible, to support cash flow during a period when both prices and mine output have been lacklustre.
For example, a smelter clean-up enabled Lonmin to recover around 73,000 oz of platinum from the reprocessing of refractory bricks, slag and other materials, while Anglo American Platinum sold 70,000 oz of platinum from refined inventories.
These stock reductions were partly offset by some modest increases elsewhere: Anglo saw an increase in pipeline inventories following a run-out at its Waterval smelter, while Northam began to build stocks of ore and concentrate ahead of the commissioning of a new smelter due in late 2017.
Key takeaways from the report:
- Lower South African supplies were offset by higher sales from Russia and Zimbabwe.
- Chinese jewellery recycling was up, but weak steel prices limited growth in auto scrap recoveries.
- Auto catalyst demand for platinum rose by 2%, with European consumption at eight-year highs.
- Industrial demand reached a five-year peak, with strong buying by Chinese companies.
- Chinese jewellery demand fell by 16%, with lower retail sales and destocking by distributors.
- Weak yen prices and a large discount to gold supported Japanese investment demand.
Read the full report here.