Blackouts, wars and hybrid cars expected to lead to surge


Platinum prices soared as high demand met low supply.

Tomohiro Ohsumi | Bloomberg | Getty Images

s price platinum This year is expected to surge due to the following factors south africa blackoutthis ukraine war and increased production of hybrid vehicles.

Investment bank UBS has readjusted its platinum price forecast for 2023, predicting that the price of the precious metal will be $1,150 an ounce in June, up from a previous estimate of $1,100, and $1,200 an ounce in December. At the time of writing, the price of the precious metal was $1,004.90 an ounce.

“Following a strong rally at the start of the year, rising U.S. interest rates stoked growth concerns and a stronger dollar weighed on platinum,” UBS said in a research note last month.

“We recommend that investors with high risk tolerance increase exposure or sell downside price risk,” the report said.

platinum Best quarter since 2008 It hit $1,086 a troy ounce in December, up more than 26 percent from the start of the three-month period.

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A chart showing platinum prices.

According to the World Platinum Investment Council, a global platinum shortage will be “worse than expected” in 2023 as demand soars and supply struggles to keep up.

The committee forecasts a supply deficit of 556,000 ounces (556 koz) this year, following a global glut of precious metals in the previous two years.

In 2022, WPIC recorded a surplus of 776,000 ounces, but by 2023, supply will outstrip demand, resulting in a “significant deficit,” said Ed Sterck, WPIC director of research.

“The point is we expect total demand to grow 24% year-over-year,” Steck told CNBC, but supply is only up 13% from last year.

“On the demand side of the equation, we think [platinum is] Economic uncertainty is well avoided,” Steck said, while a number of factors contributed to a “restricted outlook” on the supply side.

supply problem

Platinum refined ore supply is down 18% year-on-year in 2022, with South Africa and Russia seeing the largest declines, according to the WPIC.

According to UBS, South Africa typically accounts for more than 70% of global platinum mine supply, but the process has been hampered by State power crisis deepensThe WPIC reported that the country’s 2022 production is down 24% year-on-year, and expects continued volatility to keep mining supply “broadly unchanged” this year.

Russian supply is down 10% year-on-year in 2022, with war-induced geopolitical tensions hampering shipments of platinum-containing products. The WPIC estimates that total platinum production in Russia will “fall slightly but remain strong” this year as international shipping problems persist.

Recycling

Recycling is another major source of platinum, but global recycled platinum supply also fell in 2022. Cars are being driven for longer due to reduced new car supply and changing consumer habits, while the amount of platinum-containing jewelry scrapped last year also fell, the WPIC report said. Weak jewelery sales in China “limited sell-back activity,” the report said.

The WPIC estimates that recycled platinum supply will recover somewhat in 2023, but at levels that will remain below pre-pandemic levels.

Increase in demand

Platinum is becoming an increasingly important component in new cars, with the precious metal replacing pricier palladium in catalytic converters. The metal helps neutralize harmful emissions from vehicles, so stricter emissions regulations and the growing popularity of hybrid vehicles will only put more pressure on platinum demand.

According to WPIC, global automotive demand for platinum is expected to grow by 10% to 3.246 million ounces by 2023.

Sterck told CNBC that jewelry “is probably the biggest area of ‚Äč‚Äčuncertainty” in terms of platinum demand, but it’s a relatively small part of the picture.

Demand is expected to increase, but only by 2% to 1.936 koz, according to the WPIC. Global demand will be weighed by economic uncertainty over consumer spending in China and recession fears across Europe.

According to the WPIC forecast, industrial demand for platinum will grow by 12% year-on-year in 2023, with platinum use in the glass and medical industries expected to increase.

All things considered, it is “relatively likely” that the platinum market will enter a “sustained and prolonged deficit,” Steck told CNBC.



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