17.05.2023 – Golden times for the bulls in the platinum market: if the lobby group World Platinum Investment Council (WPIC) has its way, then a severe shortage of the precious metal is looming. Now such an assessment is not disinterested. Nevertheless, it may be correct. We illuminate the background.
Platinum did not come in the past months quite from the place. Only from February the price ran upward, here the daily chart. If the association is right, then there is more to come.
According to the WPIC, the world will experience one of the strongest deficits in the past five decades in the coming quarters. Demand remains robust, it said, and will exceed supply by 983,000 ounces this year. That would be the largest shortfall since the 1970s. As recently as March, the WPIC had warned of a shortfall of just 556,000 ounces.
China buys – South Africa supplies less
It added: “Opportunities for investors remain good for years to come, unless there is a collapse in demand or a substantial increase in supply, but both are unlikely. Demand from industry is expected to pick up by 17 percent year-on-year – mainly due to China’s glass and chemical industries, it said.
Meanwhile, the energy crisis in South Africa is slowing production, the WPIC judged. The country, after all, provides 70 percent of the supply. At the end of April, South Africa’s state-owned energy utility Eskom Holdings had again warned mining groups of a supply crisis. Ailing infrastructure, corruption and sabotage plague the country. High-quality coal is exported; South African power plants, on the other hand, receive low-quality coal that causes considerable damage. Impala Platinum Holdings Ltd. said weeks ago that the company expects output to fall.
Western sanctions against Russia also negatively impacted supply, the WPIC continued. All of this has caused a small flight into platinum ETFs, with Bloomberg reporting the strongest influx of capital since March 2019 in late April.
Platinum is valued for its electrical conductivity. It is resistant to water, air and certain acids. The white metal is used primarily in automotive catalytic converters, as well as in contacts in electrical engineering and electronics, and in hydrogen generators. It is also used in pacemakers and brain probes, as well as in dentistry. This is because it has the highest organ and body compatibility of all precious metals. And of course platinum is valued as jewelry and in coins and bars as a financial investment.
Our conclusion: We are curious to see whether the WPIC’s assessment is correct. And we are already wondering whether the government’s forced trend towards electric cars will not stifle the demand for platinum in catalytic converters as a mega-trend. Whether long or short – Bernstein Bank wishes successful trades and investments!
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