WPIC: Platinum market is expected to be short for the third time in a row in 2025

The Zhitong Finance App learned that the World Platinum Investment Association-WPIC® today released the “Platinum Quarterly Journal” for the third quarter of 2024, which includes revisions to the 2024 forecast and the first forecast for 2025. Due to continued unusually strong demand from the previous year, demand reached 247 tons in 2024 (same level year on year) and once again exceeded limited supply (226 tons, up 2% year over year), and the forecast gap will reach 21 tons. The market is expected to experience a shortage of 17 tons for the third time in a row in 2025. Total demand remains strong, reaching 245 tons (-1% year over year), but total supply will still be limited and will increase by only 1% to 228 tons.

Despite strong performance in the third quarter of 2024 and an improvement in recycling supply, the supply side is still facing restrictions.

Supply in the third quarter of 2024 increased 7% year over year to 46 tons (mainly due to increased inventory releases in South Africa, which moderated production growth in that quarter), but the global mineral supply for the whole of 2024 was basically the same as last year's restricted level, at 177 tons (+1%, +2 tons), reflecting the continued challenges faced by the mining industry. Downward production risks still exist (such as the continued downward trend in the price of a basket of platinum group metals and the ongoing restructuring process), and are likely to continue next year. As a result, the global supply of platinum minerals is expected to decrease by 2% (-4 tons) year over year to 173 tons in 2025.

The recent adverse factors plaguing global platinum recycling supply may soon be addressed. As a result, secondary supply is predicted to increase 3% year-on-year to 49 tons in 2024, and 12% to 55 tons in 2025, yet still below the 5-year average of 8% before the COVID-19 pandemic. Combining the two, the total global supply of platinum in 2024 was 226 tons (up 2% year on year), while in 2025 it was 228 tons (up 1% year on year).

At the same time, ground stocks are forecast to drop 16% to 111 tons in 2024, slightly higher than the five-month demand, and then drop another 15% to 94 tons by 2025.

Demand for automotive platinum will hit an 8-year high in 2025

Due to the double impact of economic challenges and high interest rates, the forecast for automobile production this year has been lowered, particularly in Europe. As a result, global automotive platinum demand fell 3% (-0.7 tons) year on year in the third quarter of 2024, and is expected to drop 2% (-2 tons) year on year to 99 tons in 2024, including 23 tons of platinum to replace palladium.

Regulatory challenges have been further mitigated, and automakers are adjusting strategies to encourage sales of low-carbon hybrid vehicles, mainly internal combustion engines. As a result, automotive platinum demand is predicted to increase 2% year-on-year to 101 tons in 2025, reaching the highest level since 2017.

The jewelry industry is growing steadily

In the third quarter of 2024, global demand for platinum jewelry increased 7% year over year to 15 tons (+1 ton), mainly due to a 68% increase in Indian jewelry production to 2 tons, the second-highest quarterly figure in the WPIC report series since 2013. This increase, combined with growth in major markets such as Japan and North America, will drive demand for platinum jewellery to increase by 5% (+3 tons) year-on-year to 61 tons in 2024.

This positive trend is expected to continue until 2025, and demand is forecast to grow 2% (+1 ton) to 62 tons. The Indian market will maintain its growth trend, and North America will continue to rise, driven by post-election sentiment. Product innovation will also support the growth of the Chinese market.

Industrial platinum demand will be reduced by 9% in 2025 as capacity expansion slows

Industrial demand was strong in the third quarter of 2024, with a year-on-year increase of 15% (+2 tons). This increase was mainly due to increased demand from the electronics and medical industries (10%) and a 96% surge in usage in the glass industry (albeit from a low starting point). Industrial demand for the whole of 2024 will be reduced by 1% from the previous year to 76 tons. As China's cyclical capacity expansion comes to an end, growth in the electronics industry (+1%, up to 3 tons), the medical industry (+4%, up to 9 tons), the hydrogen industry (+123%, up to 2 tons), and the glass industry (+29%, up to 21 tons) will be offset by a 28% decline in the chemical industry.

After three years of extraordinary growth, industrial demand is expected to drop by 7 tons to 69 tons in 2025, or 9%. The main reason for this decline is that demand fell by 57% (-12 tons) to 9 tons due to a reduction in the volume of capacity expansion in the glass industry. However, the chemical industry (+17%, increase to 20 tons), petroleum industry (+31%, increase to 7 tons), medical industry (+4%, increase to 10 tons), and hydrogen industry (+32%, increase to 3 tons) are expected to show strong growth in 2025.

Investment demand is expected to increase net for the third consecutive year in 2025

The sell-off of platinum ETFs in the third quarter of 2024 and changes in platinum inventory on exchanges led to a net sell-off of 7 tons this quarter, resulting in a net divestment for the first time this year. In 2024, China's demand for large platinum bars (500 grams and above) is expected to increase by 17% to 5 tons, and the annual net ETF holdings will reach 5 tons. However, due to price-dominated sales in the Japanese market and weak demand in North America, global demand for platinum bars and coins (excluding China's large platinum bars) fell 47% (-5 tons), partially offsetting this increase, resulting in a net investment demand of only 12 tons for the whole year.

It is predicted that in 2025, the total investment demand will increase 7% to 13 tons, driven by the increase in exchange inventories and an 8% increase in China's heavy-weight platinum bars (500 grams and above). Although global investment demand for platinum bars is expected to fall by 12% to 5 tons, demand in North America is expected to resume growth. It is predicted that some US investors expect internal combustion engine vehicle production to be higher and invest in platinum for a longer period of time, so ETF holdings will also increase by 2 tons.

Trevor Raymond, CEO of the World Platinum Investment Association, commented: “Driven by both strong demand and continued weak supply, the platinum market will experience severe shortages for the third year in a row in 2025. In today's uncertain global economy, it is probably to be expected that the market performance of platinum as an industrial metal is poor. However, as we can see in today's research results, even in today's difficult environment, platinum has shown tenacious vitality due to its diverse end uses.

“At the heart of the problem is that the supply of platinum for mining and recycling remains tight. In the third quarter, basic mineral supply issues were covered up due to the release of revolving inventories, and production cuts in mining operations were also hidden. Continued headwinds pose downside risks to next year's supply, particularly as mining companies re-evaluate production plans and restructure operations to reduce the negative impact of platinum group metal basket prices on mining sustainability. Notably, plans to rationalize supply will have short-term negative effects, while also severely limiting any short-term supply response to increased demand or higher platinum prices. Meanwhile, while we forecast recycling supply is returning to pre-pandemic levels, barriers remain, which means the recycling curve continues to move backwards.

“Continued growth in demand for automotive platinum is a driver of demand growth in 2025. Contrary to expectations, the slowdown in sales of pure electric vehicles has led to continued growth in platinum demand for automobiles over a long period of time. Meanwhile, stricter emissions legislation, increased production of hybrid vehicles, including internal combustion engines, and annual growth in platinum replacing palladium have boosted the industry's demand for platinum.

“When it comes to investing in platinum, we're happy to see that Market Openers, the world's third-largest retailer, are starting to sell platinum bars and platinum coins, making it easier for US investors to invest in platinum. This has greatly raised awareness about platinum as an investment asset. For many Americans, this also highlights the asset planning of precious metals, including platinum, for retirement portfolios.

“As highlighted by various initiatives presented at the recent COP29 conference, the development and application of green hydrogen remains an important topic on the agenda. Platinum's role in the hydrogen economy remains as important as ever. We predict that in 2025, despite a small base, hydrogen-related platinum demand will increase substantially, indicating steady growth in this area. This trend continues to attract the attention of global investors, providing a compelling opportunity to invest in global decarbonized assets.