Near-term platinum demand relatively resilient despite a soft economic outlook

While the global economic outlook has continued to be depressed, the platinum demand outlook is improving in 2024, although still remaining subdued, as published in WPIC's Platinum Quarterly.
The platinum outlook for 2023, as published in the last Platinum Quarterly, incorporates recessionary risks, while the report expects deteriorating real consumer purchasing power as determined by taking consensus GDP less consensus CPI estimates.
The platinum demand growth is the primary driver which transitions supply-demand balances from a surplus in 2022 to sustained deficits from 2023 and beyond. Whilst the economic outlook appears somewhat shaky, the platinum market is, perhaps, surprisingly well insulated from the challenges ahead, at least in the near term. Accordingly, significant downside risks to demand appear relatively unlikely. The main driver of demand growth is the increasing substitution of platinum for palladium in gasoline vehicles, as well as the growth of the hydrogen economy and improving investment demand. In aggregate, these offset weaker outlooks for industrial and jewellery demand.
Automotive demand: An erosion of spending power will impact the ability of some consumers to purchase new vehicles. Additionally, after three years of significant automotive production shortfalls, it is believed that there remains an element of pent-up demand for replacement vehicles. So, any challenges will largely be washed through by 2024 with the production of light vehicles to grow by 3% to 89M units. Also, ongoing growth in substitution and higher loadings on heavy-duty vehicles will result in automotive demand for platinum growing by 11% year-on-year to 3,615 koz. This growth continues through the period to 2027 and results in automotive demand peaking in 2027 at 4,187 koz.
Industrial demand: Industrial demand is relatively well protected from near-term recessionary headwinds. Industrial demand for platinum is influenced more by multi-year capacity addition decisions rather than short-term demand fluctuations. With capacity additions for 2023 mostly committed financially and in terms of construction progress, downside risks are biased towards 2024 and beyond. Reflecting the economic overlay, as well as an approximation of the impact of the timing of capacity additions, industrial demand in 2024 is expected to decline by 10% year-on-year to 2,254 koz. It is then expected to grow modestly to an average of 2,443 koz over the rest of the period.
Jewellery demand: Jewellery demand is the demand segment that is most at risk, as a worsening of consumer purchasing power beyond current forecasts would almost certainly flow through to reduced jewellery purchasing. Notwithstanding heightened demand risks, platinum jewellery demand has been upgraded by 3.7% on average between 2024 to 2027 since WPIC’s last report. On average, WPIC expects the continued strength in demand from the rest of the world to offset ongoing declines in China, resulting in jewellery demand remaining broadly flat at a little over 1,900 koz, versus the 1,936 koz forecast for 2023.
Investment demand: Investment demand is another area of uncertainty. Whilst bar and coin demand tend to be resilient, or even grows, during recessions or periods of heightened uncertainty, the outlook for ETF investments and exchange stocks is harder to call. Recent ETF disinvestment has been a function of macro asset allocation in a rising interest environment, assisted by asset-class agnostic investors rotating into the futures or forward markets. It also seems likely that investor interest in exposure to this outlook through the ETFs is only likely to increase. This results in a flat investment demand outlook of 560 koz p.a.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished