Platinum Market Faces Deficit as Supply Struggles to Meet Demand
Despite persistent challenges with platinum prices, the precious metal market is seeing support as the World Platinum Investment Council (WPIC) predicts a market deficit in both 2024 and 2025. Edward Sterk, WPIC's director of research, highlighted that while demand for platinum remains steady, supply has struggled to keep up, a trend that looks set to continue in the coming years.
According to the latest WPIC report, the platinum market is expected to face a deficit of 682,000 ounces in 2024, a slight improvement from the one-million-ounce shortfall previously forecasted in the second quarter. The initial forecast for 2025 also points to a significant deficit, estimated at 539,000 ounces. Sterk attributed the slight improvement to increased production in South Africa and lower inventories in COMEX warehouses, although he emphasized that the fundamental supply and demand gap remains largely unchanged.
The automotive sector continues to be the largest driver of platinum demand, primarily due to its use in catalytic converters for internal combustion engines (ICEs) that help reduce emissions. Despite this, 2024 saw a decline in automotive platinum demand, linked to slower sales of ICE vehicles amid high interest rates and increased demand for electric vehicles, which do not require platinum. The WPIC projects that automotive demand for platinum will decline by 3% to 3.173 million ounces in 2024 compared to the third quarter of 2023. However, a 2% recovery is expected in 2025, pushing demand to 3.245 million ounces, reaching an eight-year high.
Beyond the automotive industry, industrial demand for platinum saw robust growth in the third quarter of 2024, up by 15%. This increase was driven by a 10% rise in demand from the electrical and medical sectors and a 96% surge in the glass industry, albeit from a low starting point. However, industrial platinum demand for 2024 is expected to decrease slightly by 1% to 2.434 million ounces, with a more significant drop of 9% anticipated in 2025.
Jewellery demand has also remained a stable element of the platinum market. WPIC reported a strong increase in platinum jewellery consumption in the third quarter of 2024, with demand rising to 1.951 million ounces, representing a 5% year-on-year growth. India, in particular, has emerged as a key market, consuming 66,000 ounces in the third quarter, marking the second-highest quarterly total since 2013. Jewellery demand is forecast to grow by another 2% in 2025, with increased interest expected in India, North America, and China, partly due to post-election sentiment and technological innovations.
The investment demand for platinum presents a mixed picture. The market saw outflows from platinum-backed exchange-traded funds (ETFs) in 2024, and higher prices in the third quarter exerted downward pressure on demand for bars and coins. Nevertheless, WPIC noted that demand for large bullion in China remains strong. Total investment demand is projected to fall slightly to 393,000 ounces in 2024, a 1% decrease from the previous year. However, investment demand is expected to recover by 7% in 2025, with growth in North American bullion and coin markets and a 50,000-ounce increase in platinum ETFs as U.S. investors seek exposure to internal combustion engine markets.
