Platinum is set to become a major focus for investors as the industrial demand for the precious metal pushes the market into a significant deficit. According to recent research from the World Platinum Investment Council (WPIC), the platinum market is on track to see a 1.071-million-ounce deficit this year, driven by growing demand and shrinking supply.
The surge in demand can be attributed to the global green energy transition, in which platinum plays a crucial role. The wind power sector, in particular, utilizes platinum-based glass fibers to make rotor blades lightweight and more efficient. This growing use of glass fibers in various industries is expected to drive industrial demand for platinum in the long term.
The latest report from WPIC projects that industrial demand will grow by 317,000 ounces this year, reaching a record high of 2.652 million ounces. Additionally, automotive demand is expected to rise to 3.262 million ounces, driven by both traditional and hybrid vehicles.
While the growing electric vehicle market poses a threat to platinum, hybrid vehicles with their higher platinum loads are expected to mitigate the downside risks. Furthermore, the report indicates that investor interest in platinum will also increase, with investment demand forecasted to jump by 36% from 2022.
On the other hand, lackluster jewelry demand remains a weak pillar for the platinum market, with a projected 3% decline in consumption compared to the previous year.
Looking ahead to 2024, WPIC anticipates a continued imbalance in the supply and demand outlook for platinum. The market is expected to experience a deficit of 353,000 ounces, reflecting weak supply growth that cannot keep pace with healthy demand. Despite the potential impact of a recession on industrial demand, government fiscal programs targeting the green energy transition are predicted to provide support through increased demand for fiberglass.
The potential for two consecutive years of deficits is likely to attract attention from precious metals investors, who are waiting for a price response to market conditions. With above-ground stocks severely depleted, the underlying fundamental backdrop is expected to have an impact on platinum prices.
Overall, platinum’s growing industrial demand and supply deficit present an intriguing opportunity for investors seeking exposure to this precious metal.
1. What is the main factor driving the deficit in the platinum market?
The deficit in the platinum market is primarily driven by the combination of growing industrial demand and shrinking supply. The global green energy transition, particularly in industries such as wind power, has increased the need for platinum-based glass fibers, leading to a surge in demand.
2. How is the automotive sector contributing to platinum demand?
The automotive sector is expected to contribute significantly to platinum demand, reaching a six-year high. Both hybrid and traditional vehicles require platinum for various components. While the growing electric vehicle market poses a threat, the higher platinum loads in hybrid vehicles are expected to offset the downside risks.
3. What is the outlook for investor interest in platinum?
Investor interest in platinum is expected to increase, with investment demand forecasted to jump by 36% from 2022. The potential for two consecutive years of deficits in the platinum market is likely to attract attention from precious metals investors.
4. What is the projection for platinum supply growth?
Platinum supply growth is anticipated to be fairly stagnant, unable to keep pace with the growing demand. The report from the World Platinum Investment Council expects a 3% increase in platinum mine supply from 2023, but overall supply growth is limited.