All eyes are on the gold market in 2024: impressive yearly gains and bullish forecasts for next year amid favorable fundamentals have left many other precious metals in the dust. Platinum is no exception with its modest 5% price fall so far this year despite a persistent market deficit which is expected to continue in 2025 for the third consecutive year. Despite this supply deficit, prices have fluctuated within a $850-$1100 range for a while.
This may seem counter-intuitive, however both supply and demand may remain mostly unchanged next year, according to a recent forecast by the World Platinum Investment Council (WPIC). Until the situation with fundamentals changes significantly, the platinum market may remain in limbo for the time being.
Hopes and dreams for the platinum sector are still directed to the future, and are closely tied to the worldwide green energy transition, as metal producers are facing immediate threats to their output such as mine closures and slashed investments.
High above-ground stocks put pressure on fundamentals
Platinum availability considers not only mine supply, but any metal held in stock, or metal held by users that could be released to the market. These inventories, sometimes called above-ground stocks, can make up for a shortfall in market supply and come in two forms - market stocks and producer stocks.
Producer stocks, held by miners, and market stocks held by fabricators, dealers, banks and depositories around the world are relatively liquid. They are readily available to the market as the metal is either not in industrial use, has not been purchased or has been bought purely for investment purposes.
WPIC forecasts that in 2025, the platinum market will face a deficit of 539,000 ounces, with supply edging up 1% in 2025 to 7.324 million ounces and demand decreasing slightly by 1% to 7.863 million ounces. Meanwhile, above-ground stock levels still remain relatively high at 3.553 million ounces in 2024. Next year, they may decline by 15% to 3.014 million ounces.
A projection by Metals Focus paints a similar picture. The metal consultancy expects above-ground stocks to fall to 9.6 million ounces in 2024, equivalent to 15 months of demand, and physical platinum deficit is forecast at 528,000 ounces in 2025.
“We expect this trend to persist in the short-term, while platinum’s fundamentals benefit the metal in the longer-term,” Metals Focus said.
This amount of stockpiled platinum will not be released on the market in the short term, especially during the current low price environment. Even though WPIC expects the platinum market to remain in deficit throughout its forecast period (from 2024 to 2028), the sentiment hinges on big drivers for demand. And they may not be present just yet.
Demand as a long game
The UN has set an ambitious goal to expand green energy generation and reduce greenhouse gases emissions over the next few years. Platinum is set to play an integral part in this process thanks to its uses as a catalyst in green hydrogen fuel generation. However, some market participants have lost faith in the metal after investing prematurely into the hydrogen narrative which has been slower to materialize than expected.
A brief look at major upcoming green hydrogen developments for 2025 reveals a handful of initiatives and several projects in their nascency, such as Germany’s “core hydrogen grid” pipeline to be completed in 2032. Even though China is making a commendable effort to fulfill its hydrogen goals ahead of schedule, its 2.5 GW electrolyzer grid to be installed before the end of 2024 still dwarfs in comparison to its solar grid which surged to 217 GW of new installations in 2023.
Even though WPIC expects the global effort to make clean hydrogen production the largest source of platinum demand by 2040, accounting for as much as 35%, a more mundane development is shifting the market in the shorter turn. Weakening sales of battery-powered electric vehicles (BEV) have prompted automakers to shift focus towards hybrid vehicles with small combustion engines outputting lower-CO2 emissions. Consequently, automotive platinum demand, driven mainly by the production of catalytic converters, is set to reach an 8-year high in 2025 at 3.245 million ounces.
Catalytic converters represent around 40% of global platinum demand today. In its Sustainable Development Scenario, the International Energy Agency (IEA) says that demand for platinum group metals for use in catalytic converters would remain above that for hydrogen fuel cells by 2040.
With gold prices soaring, platinum may also regain its allure for jewellery consumers. WPIC expects the demand in this sector to increase by 2% to 1.983 million ounces in 2025. Growth is anticipated to continue in India, and also expected in North America, driven by post-election sentiment, and, in China, supported by product innovations. India’s growing middle class, increasing disposable incomes, and evolving consumer preferences have fuelled the demand for precious metals, including platinum.
With hopes for swift adoption of green technologies tapering out, market participants switch their focus to more conservative uses of platinum to assess fundamentals. As these shorter-term considerations paint a bleak picture for the market, prices have come under pressure. This does not bode well for miners and recyclers who are forced to scale down production and investments.
Miners in distress
Low platinum group metals (PGM) basket price in general and platinum price in particular have been plaguing major producers in South Africa, Russia and elsewhere for a while.
South Africa, the world's leading platinum producer, has seen a steady decline in its output since hitting a high of 5.3 million ounces in 2006. Northam Platinum CEO Paul Dunne predicts that the country’s platinum production will drop by 10% over the next five years, from 3.9 million ounces to roughly 3.5 million ounces by 2029. This decline is compounded by ageing mining infrastructure and a lack of investment in new mines.
In its latest Environmental, Social and Governance (ESG) in PGM market report, Metals Focus comes to a conclusion that miners are increasingly strapped for cash to invest in these initiatives amid a lower PGM price environment and tighter margins. Such producers as Anglo American Platinum (Amplats), Impala Platinum (Implats), Northam Platinum, Sibanye-Stillwater and Norilsk Nickel which account for about 85% of global PGM supply have retained their Scope 1 and 2 greenhouse-gas emissions from PGM mining mostly flat year-on-year in 2023 at 22.82 million tonnes of CO2 equivalent.
An increase in Amplats’ emissions of 5% year-on-year to 4.29 million tonnes of CO2 equivalent, owing to energy inefficiencies caused by unreliable power supply from South African power utility Eskom, was offset by reductions in emissions at Norilsk, Sibanye-Stillwater and Implats, which have recorded shifts in energy consumption patterns.
And it is not just about ESG initiatives. South Africa’s PGM mining industry may have cut around 10 000 jobs this year, or 6% of total amount. Some PGM miners such as Implats have moved to restructuring measures, others like Norilsk Nickel are trying to offset the prevailing market conditions by investment in future technologies. It remains to be seen which tactic would be the most beneficial for survival.
Survival of the fittest
The prevailing market conditions are not favorable for platinum in 2025 - stagnant demand and high levels of stockpiles continue to exert pressure on prices. In this environment, cost-cutting efforts could jeopardise the survival of some operations, but the ones that do come out of the peril would become more competitive.
Recycled PGM may grow their supply share as vehicles with higher PGM loadings are increasingly decommissioned, while hybrid cars and, eventually, green hydrogen projects find their way into our everyday lives.
At a recent UN Climate Change Conference (COP29), nearly two dozen industry associations have called for urgent action to scale up the outlook for clean hydrogen and its derivatives. As part of decarbonisation efforts to combat climate change, PGM catalysts are being applied to technologies for more efficient energy generation and storage. Green hydrogen provides holistic climate solutions that will likely be progressively acknowledged as being the best path towards broad overall climate-change abatement.
So far however, the platinum market is playing a long game and is looking for signs of a new optimism.
Theodor Lisovoy, Managing Editor, Rough&Polished
Produced and published as part of the project "Best practices have a voice"
