The deficit between platinum supply and demand should widen to nearly 889,000oz this year before narrowing to around 402,000oz in 2014, HSBC says.
But, this doesn’t mean necessarily that platinum prices will head higher. According to the bank, while it expects the tight supply picture to drive prices in the future, it has cut its average price forecasts for this year and next to $1,500/oz and $1,625/oz respectively from 1,580/oz and 1,725/oz.
Part of the reason for this, the bank writes in its latest Platinum Group Metals Outlook publication, is that the metal has been more influenced than it expected by the recent falls seen in gold, which it says will likely pull average platinum prices lower than might otherwise have been the case.
But, the bank writes, tighter fundamentals in the platinum market over the course of the next year are expected to see the metal shake off the yellow metal’s influence and increasingly decouple from gold.
Adding that a rotational shift out of commodities and into equities has also taken a toll on platinum prices this year, the bank argues that another reason for the lack of decisive upwards movement (despite a significant deficit seen so far this year) is that the availability of above-ground stocks, may be larger than is generally believed.
But, it writes, “While above-ground stocks may be currently ample to finance the production/consumption shortfall in the platinum market, we believe that persistent deficits going forward will eventually drive prices higher. Currently low lease rates imply there is no immediate shortage of platinum.”
On the demand side, the bank does not expect the recently launched South African platinum ETF to enjoy quite the same level of success in 2014 as it has enjoyed this year (HSBC raised its forecast for ETF increases in 2013 to 750,000oz) but it does expect ETF demand to continue to grow. It expects ETF demand to rise by 150,000oz in 2014.
Demand for autocatalysts is also expected to grow in stature in 2014, as “moderating but still strong demand in the US and China” complements a mild recovery in demand from Europe
According to the bank’s automotive analysts, global light vehicle production growth should come in at 2.2% this year and 3.3% in 2014, before accelerating further in 2015, to 4.5%.
“Although still positive, global auto demand gains are moderating from the 6.5% increase registered in 2012. A recovery in European demand, ongoing robust auto sales in China and steady US demand are expected to more than offset the impact of moderating demand growth in Eastern Europe and some emerging nations.”
From an industrial demand perspective, HSBC predicts that a recovery in demand, from both oil refiners and the glass sector should help increase overall industrial demand, while Chinese jewellery consumption is expected to continue apace despite a slowdown in the country’s economic growth.
While, the picture for platinum demand remains positive, the supply side of the equation is anything but.
Cushioned by significant above ground stocks that have kept the markets supplied, prices have not reflected the significant deficits seen in 2012, the one expected for 2013 or the one predicted for 2014.
Part of the reason for this is that, while the world’s major platinum supplier, South Africa remains vulnerable to strikes, declining ore grades and the rationalization plans of producers, HSBC says it believes these producers have stockpiles “which may be released onto the market in the case of supply disruptions.”
HSBC predicts mine supply in 2013 to come in at 5.673moz, almost unchanged from 5.640moz in 2012.
The bank expects “global mine supply to increase based on a slight increase in output and sales of product already refined. Gains in North America, Zimbabwe and small producers will be offset by slightly weaker Russian production.
However, it says, “Low prices have made a large swathe of mine output uneconomical. An increase in the volume of autos scrapped is buoying the amount of platinum derived from recycling.”
Looking ahead, HSBC says, “At the very least, in the current price climate no South African producer can afford to significantly expand capacity. This suggests to us that should demand increase significantly, producers might not be able to respond to the increased appetite for metals. This would have a commensurate bullish impact on prices.