People aren’t recycling jewellery and it’s causing a drop in global platinum supply
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The global supply of platinum is expected to drop by 2 per cent this year mainly because fewer people are recycling jewellery.
But the global market is also down — and expected to move into surplus — amid lower demand for the rare metal in the automotive, jewellery and investment sectors.
That’s according to the latest quarterly report from the World Platinum Investment Council — a South Africa-based group of platinum producers.
Australia does not have a track record in the platinum group metals sector — which also includes palladium, ruthenium, rhodium, osmium and iridium. Though demand from car makers has previously convinced a few ASX-listed explorers such as Podium Minerals (ASX:POD) to take a closer look.
About 40 per cent of platinum is used in auto catalysts — a critical part of catalytic converters used to reduce pollution in 98 per cent of cars.
Jewellery makers account for up to 35 per cent. Other applications include fuel cells needed in electric cars and industrial products ranging from computer hard disks to dental crowns.
The World Platinum Investment Council announced on Tuesday it had revised down its full-year supply forecast “following reduced jewellery recycling”.
Between 20 and 30 per cent of the world’s platinum supply comes from recycling — mainly jewellery or old auto catalysts.
Overall global demand would fall by 2 per cent to 7.9 million ounces compared to 2017, due largely to an anticipated 10 per cent fall in jewellery recycling.
“Most mining regions [are] expected to post lower refined production in 2018 with notable declines in South Africa, Zimbabwe and Russia.”
Decline in global platinum market
Meanwhile, the global market was also expected to contract by 2 per cent.
Demand from the car industry would fall by 3.1 million ounces amid declining sales of diesel cars — especially in Europe.
Diesel car sales are plummeting because of environmental concerns.
That was despite “an expected increase in demand for platinum from the industrial sector, with a 60 per cent rebound in petroleum demand following a raft of refinery closures in 2017”.
Demand from investors was flat compared to 2017 “as robust demand for bars and coins, spurred by Japanese bar buying, is outweighed by a marked reduction in ETF [exchange-traded funds] holdings in the second quarter”.
“The market is forecast to be in surplus for the year at 2.5 million ounces (not including platinum held by ETFs, miners or producers).
“Supply remains constrained and we expect this to remain the case for the foreseeable future,” said council chairman Paul Wilson.
“An encouraging increase in industrial demand cannot mask a disappointing, but anticipated, fall in demand from the automotive sector.
“We continue to scrutinise the extent to which automakers address declining diesel car sales and are switching out palladium for platinum in gasoline cars.
“We have been particularly encouraged by a positive shift in the global sentiment towards the inclusion of fuel cell electric vehicles in the future vehicle mix.”