The sluggish platinum sector could be in for a rebound as prices are seen to improve. This early, demand for platinum worldwide is expected to increase and exceed supply for a fifth straight year.
Johnson Matthey is projecting that platinum demand may beat supply this 2016, citing the demand of vehicle manufacturers for the metal to use in accessories that can curb harmful emissions. The UK-based company however said that the growth rate will be slower compared to the past two years.
Still, this projection is a welcome development for many companies involved in platinum mining and production given that the metal has not exactly been the best performing commodity.
Robust Performance in 2015
The World Platinum Investment Council (WPIC) echoed the UK-based company’s projections, citing the robust performance of the metal in 2015. According to its Platinum Quarterly publication, the global platinum market ended the year with a supply deficit compared to supply.
It cited that there was an increase in automotive demand in 2015, up by 5 percent compared to the previous year. It noted that despite the problems that beset the automotive industry like the Volkswagen emission scandal, there was growth in the demand buoyed by growth in vehicle sales in Western Europe. The organization said that the imposition of new Euro 6 legislation positively affected platinum loading per car.
There was also growth in automotive demand in India, up by 9 percent compared to the previous year.
Aside from the demand from the automotive sector, other industries also affected the prices of platinum worldwide.
WPIC said industrial demand for the metal increased by 4 percent in 2015, with a 2 percent growth in chemical demand in North America, China, and Western Europe.
The petroleum sector also contributed to the increase, with greater global demand for oil refining and net capacity expansion more than doubling.
There’s also the demand from jewelry in India, with sales in the country boosted by strong sales of men’s jewelry and bridal growth.
WPIC head honcho Paul Wilson commented that the platinum market is exhibiting signs of robust growth. He cited that demand from all sectors remain strong, particularly in Asia thanks to jewelry demand and in Europe.
Outlook in 5 Years
One of the world’s largest platinum companies also has the same projection.
Anglo American Platinum head of marketing Andrew Hinkly recently said that outlook for the metal’s demand in the next half a decade is very encouraging. He made the projections during the recent Investing in African Mining conference.
He echoed WPIC’s statements that requirements for clean vehicle emissions will continue to buoy demand for platinum, particularly in Europe and India. He also said the platinum jewelry market in the Asian country is also doing well.
Meanwhile, another large platinum company believes platinum prices will improve starting in 2017.
Impala Platinum, the second-largest platinum producer in the world, said that strong fundamentals supported by increasing automotive sales will affect platinum prices starting in 2017.
Its spokesperson, Johan Theron, said in a report that the consensus view of the company is that platinum prices will rise again in 2017.
South Africa’s Moves
Meanwhile, the largest platinum producer in the world is planning to set up a fuel cell component plant in three years to increase demand for the metal, and support companies that were badly hit by low platinum prices.
South Africa, the top exporter of platinum, has been badly hit by the slowdown in platinum prices. This has forced many mining firms to cut production, jobs, and even assets. In 2014, about two thirds of the platinum industry companies in the country were in the red.
But hope springs eternal, they say.
Isondo Precious Metals recently announced that the company is planning to put up a fuel cell plants. Fuel cells generate electricity by combining oxygen and hydrogen over a catalyst, like platinum. The said metal is widely used in catalysts to minimize emissions of diesel-powered vehicles.
The company, through its CEO Vinay Somera, revealed to Reuters that it is looking to get the manufacturing in the ground in the next 1-2 years. Isondo will manufacture and sell licensed fuel cell components worldwide, in partnership with U.S.-based Chemours Technology.
The company hopes this would bring down the costs of technology as platinum will be sourced locally. On the other hand, the South African government has committed tax incentives for the project.
The country’s trade and industry minister was also quoted as saying that his agency was also funding part of the cost of the feasibility study. He added that this technology is being looked at to build and sustain the expansion of the platinum industry.
It remains to be seen how platinum’s value will be sustained in the next few months. However, if experts are to be believed, platinum should become more valuable in 2016 compared to its sluggish performance in the last few years.