THE forecast deficit in platinum supply will
deepen in 2016, with South Africa showing a sizeable decline in output, according
to a report released by the World Platinum Investment Council.
The council, which is funded by six South African platinum producers and was set up to encourage investment in the metal, said research by SFA (Oxford) led to the organisation raising its 2016 deficit forecast by 65,000oz, to 520,000oz.
According to the council’s data, this is the fourth consecutive year of a sizeable market deficit.
"We continue to see little evidence to support rising output over the medium term. Platinum production from SA, the largest producer, has failed to reach the levels observed in 2013 and 2015," said council CEO Paul Wilson.
"Real cost increases due to labour costs — which account for over 50% of overall mining costs — continue, and, together with low metal prices, they have driven the fall in capital investment across this industry.
Sustaining current output is harder as a result."
His comments echo those of Impala Platinum CEO Terence Goodlace and Northam Platinum CEO Paul Dunne, who in recent weeks have warned of underinvestment.
Goodlace warned of South African supply "dropping off a cliff" to 3-million ounces or less in the early 2020s.
The council said capital investment in platinum mining had fallen to less than $1bn a year over the past seven years, from about $4bn.
The report showed South African platinum production falling 6% to 4.19-million ounces in 2016 compared with 2015. Russian output would drop 5% to 680,000oz.
Total mined supply would come down to 5.985-million ounces. Recycled platinum from spent autocatalysts and jewellery would gain 2% to 1.745-million ounces.
"The predicted strong growth in platinum supply from recycled autocatalysts, argued by some as potentially weakening platinum’s solid fundamentals, has not materialised," Wilson said.
"While growth in recycling supply is still likely, it remains muted, due to the ongoing low scrap steel price and reduced rates of car scrapping."
Trevor Raymond, research director at the council, said: "We believe the deficit we published today of 520,000oz is less likely to be supplied from investor selling than over the last few years as investors are increasingly aware of robust demand and constrained supply."
Above-ground stocks not held by producers, end-users or investment funds have fallen by 55% since 2012's level of 4.14-million oz to an estimated 1.875-million oz this year. These opaquely held stocks have been blamed in part for the lack of any real movement in the platinum price after the 5-month strike in 2014 that knocked 1-million oz out of SA supply.
The council, which is funded by six South African platinum producers and was set up to encourage investment in the metal, said research by SFA (Oxford) led to the organisation raising its 2016 deficit forecast by 65,000oz, to 520,000oz.
According to the council’s data, this is the fourth consecutive year of a sizeable market deficit.
"We continue to see little evidence to support rising output over the medium term. Platinum production from SA, the largest producer, has failed to reach the levels observed in 2013 and 2015," said council CEO Paul Wilson.
"Real cost increases due to labour costs — which account for over 50% of overall mining costs — continue, and, together with low metal prices, they have driven the fall in capital investment across this industry.
Sustaining current output is harder as a result."
His comments echo those of Impala Platinum CEO Terence Goodlace and Northam Platinum CEO Paul Dunne, who in recent weeks have warned of underinvestment.
Goodlace warned of South African supply "dropping off a cliff" to 3-million ounces or less in the early 2020s.
The council said capital investment in platinum mining had fallen to less than $1bn a year over the past seven years, from about $4bn.
The report showed South African platinum production falling 6% to 4.19-million ounces in 2016 compared with 2015. Russian output would drop 5% to 680,000oz.
Total mined supply would come down to 5.985-million ounces. Recycled platinum from spent autocatalysts and jewellery would gain 2% to 1.745-million ounces.
"The predicted strong growth in platinum supply from recycled autocatalysts, argued by some as potentially weakening platinum’s solid fundamentals, has not materialised," Wilson said.
"While growth in recycling supply is still likely, it remains muted, due to the ongoing low scrap steel price and reduced rates of car scrapping."
Trevor Raymond, research director at the council, said: "We believe the deficit we published today of 520,000oz is less likely to be supplied from investor selling than over the last few years as investors are increasingly aware of robust demand and constrained supply."
Above-ground stocks not held by producers, end-users or investment funds have fallen by 55% since 2012's level of 4.14-million oz to an estimated 1.875-million oz this year. These opaquely held stocks have been blamed in part for the lack of any real movement in the platinum price after the 5-month strike in 2014 that knocked 1-million oz out of SA supply.
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