The platinum price closed at $987.25 per ounce at the end of last year, still down 9.43 per cent from the start of the year, despite widespread consensus among institutions and analysts that the platinum market is in a supply deficit in 2023. Platinum is widely used in the production of catalytic converters for cars to break down harmful emissions. In recent years, the metal has also been increasingly used in the production of green hydrogen, which is hydrogen produced from renewable sources rather than fossil fuels.
Industry reports indicate that announced investments in the hydrogen technology sector will exceed $570bn by 2030. If the industry is able to realize its potential, this could mean a significant increase in demand for platinum group metals (PGMs) in the medium to long term. There is also considerable investment demand for platinum, partly because it is also a precious metal, similar to silver and gold, and is seen as a safe haven by investors.
Heraeus’ Precious Metals Forecast 2024 shows that the platinum market is expected to remain in short supply in 2024, with a projected deficit of 445,000 ounces and strong growth in global demand to 7.5 million ounces.
Analysts forecast that global platinum supply will fall slightly in 2024 to 5.6 million ounces. South African production is likely to rise due to improved power supply, but challenges remain: including lower platinum group metal prices, possible mine closures and reduced production. Secondary platinum supply from automotive catalyst recycling is expected to remain weak, with high new car prices and a shortage of semiconductor chips leading to limited recycling affecting material supply.
Meanwhile, platinum demand from the automotive catalyst sector is expected to remain stable at 3.5 million ounces, up 1% year-on-year, while industrial demand is forecast to remain stable at 2.3 million ounces, with growth in petroleum catalysts and electrical uses offsetting a decline in demand from the glass sector.
Platinum is expected to trade between $800/oz and $1,100/oz in 2024, with limited price support from the depreciation of the South African rand, due to the potential impact of supply deficits, macroeconomic weakness and mine closures.
In an interview with Investing News Network, Wilma Swarts, head of Metals Focus’ platinum group metals division, said she sees a supply gap persisting through 2024, with mine supply at increasing risk of decline. More than 50 per cent of South Africa’s mines are in the red at spot basket prices, taking into account inflationary costs such as wages, electricity and the weak South African currency, the rand. If prices remain at current levels for the next 2-5 years, production scaling down and mine closures are expected.
Rohit Savant, vice president of research at CPM Group, shares the same view, although he believes this will not happen until after 2024. He says that while mining companies are expected to face the challenge of weak prices and production cuts, especially in South Africa, this year could be difficult, especially because it is an election year and South Africa’s employment and GDP are heavily dependent on the mining sector.
Edward Sterck, head of research at the World Platinum Investment Council (WPIC), predicts that platinum will remain in a persistent market shortage through 2027. The biggest driver is likely to be the depletion of above-ground stocks reaching a tipping point and the need for higher prices to attract more material to the market.
