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Platinum Facing Big 2023 Deficit on Rising Demand and Constrained Supply

The platinum market slid into deficit in Q1 for the first time since 2021’s second quarter.

In its latest report, the World Platinum Investment Council (WPIC) ascribes the 392,000 ounce Q1 deficit to strong demand and supply limitations, saying that it’s now calling for a 2023 deficit of 938,000 ounces, up 77 percent from its previous projection.

What industries are driving platinum demand?

As mentioned, the report from the WPIC indicates that platinum demand is increasing as key industries find their groove again following the widespread effects of the global COVID-19 pandemic.

Demand from the automotive industry, in which platinum plays a key role, is expected to see a particularly large uptick this year, with usage set to rise 12 percent from 2022, Sterck said. That would put it back at levels seen prior to COVID-19.

For its part, industrial demand has been increasing consistently for the last 10 years and is set to reach record levels.

Investors snap up platinum in 2023’s first quarter

Looking at the first quarter of 2023, investment demand had a great moment, according to the WPIC.

“While the European and North American funds were still liquidating, those in South Africa have seen substantial growth, as the deterioration in the local operating environment (constrained power supply) for miners, combined with the improved outlook for the metal’s fundamentals, stimulated investor interest,” the WPIC’s report states.

All investment measurements tracked by the council — bars, coins, ETFs and exchange stocks — were up in Q1.

What factors are impacting platinum supply?

The two main factors impacting supply are electricity shortages in South Africa and operational challenges in Russia.

Investor takeaway

“What we could see is if European and North American investors kind of wake up to this deficit a bit more actively, then potentially we could see more demand that might exacerbate the deficit further,’ he explained.

At the same time, there are noteworthy concerns on the supply side. ‘On the supply side, I just think there’s pretty significant downside risk potential to output from South Africa and Russia,’ Sterck said.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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