Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Despite strong quarter-on-quarter recovery in supply, the global platinum market is set to experience a second consecutive year of deficit at just over 1.2 million ounces in 2020, according to the World Platinum Investment Council’s (WPIC) latest quarterly report.
A stellar rebound in automotive demand and sustained strong investment demand for precious metals lifted platinum demand well above supply in Q3 2020, leaving the quarter in a deficit of 709,00 ounces.
Both sides of the market showed strong recovery during the quarter, with supply and demand up by 48% and 75%, respectively, over Q2 2020.
Compared to the same quarter last year, total platinum supply in Q3 2020 fell by 5%, modest when compared to the 36% year-on-year decline in Q2 2020. Total mine supply grew to within 4% of the Q3 2019 level as operations ramped up capacity over the quarter.
The total mine supply forecast for 2020 sees a 21% fall year-on-year due to covid-19-related mine shutdowns and impact of the converter plant outages during the year.
However, the Council forecasts supply to outpace demand in 2021 with a 17% increase compared to 2%, which would close the deficit to 224,000 ounces.
Investment demand increased considerably in Q3 2020, up year-on-year by 291%, with significant year-on-year rises in ETF demand and bar and coin demand. This is expected to grow by 32% in 2020 as precious metals, including platinum, remain an attractive alternative investment, supported by platinum’s deep discount to gold.
Despite covid-19 workplace requirements in plants impacting capacity across the globe, pent-up vehicle demand and incentives in Europe and elsewhere drove growth in global automotive production levels. Consequently, automotive demand for platinum in Q3 2020 was just 3% below the prior-year quarter.
The early adoption by some cities and provinces of China 6 legislation for light-duty vehicles and the ramp-up of heavy-duty vehicles’ compliance requirements to China VI saw China platinum auto demand growth of 68% year-on-year in the past quarter.
A 24% annual increase in global automotive demand for platinum is forecast in 2021 as light-duty vehicle production is set to increase 15%, and heavy-duty vehicle production grows by 5%.
Increased loadings to meet more stringent emissions levels will also benefit the demand for platinum. So too will the potential for some platinum being used in place of palladium in gasoline autocatalysts and some shift from palladium to platinum in diesel after-treatment systems.
Global platinum jewellery demand in Q3 2020 bounced back by 27% quarter-on-quarter as pandemic-related restrictions eased, with a 14% increase in China.
Looking to 2021, global jewellery demand is forecast to gain 13%, with all regions seeing double-digit growth.
