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.
Stronger than expected shipments of platinum to China in the first half of the year spurred shortages elsewhere as supply declined from mines and recycling, the World Platinum Investment Council (WPIC) said on Monday.
It was difficult to track what happened to some of the Chinese imports, so the platinum market was in surplus on paper but on the ground tightness sent lease rates surging to the highest levels in a decade, the WPIC said in its latest quarterly report.
“It certainly is weird to have a really big surplus published yet unavailability of metal in the spot market,” said Trevor Raymond, the WPIC’s head of research.
Lease rates for platinum peaked at around 10% in May, higher than at the peak of the pandemic. The one-month lease rate has eased back to 3.6%, still much higher than the 10-year average of 0.3%, Raymond added.
China imported 1.44 million ounces of platinum in the first six months of the year, but 645,000 ounces of that could not be tracked in terms how it was used, partly due to restrictions on travel in the country, Raymond said.
“While speculative flows are certainly part of it… there also seems to be more consumption, but we can’t prove it and it’s frustrating that it doesn’t appear in our supply-demand data.”
Some buying may be due to low prices of platinum, which have shed 13% this year and last week hit the lowest in over two years, Raymond added.
China may be increasing its platinum loadings in catalytic converters of heavy vehicles due to stricter emission standards, he said.
Around 40% of platinum is used in vehicle exhausts to remove harmful emissions. It is also widely used in jewellery.
Total supply is forecast to decline 8% this year, with mine supply having declined 4% in the second quarter. Higher Russian output was offset by declines elsewhere, the report said.
Investment demand was hit by fears of a global recession and rising interest rates, causing holdings in exchange traded funds (ETFs) to fall by 89,000 ounces in the quarter, the report said.
The published data resulted in a platinum surplus of 349,000 ounces in the second quarter and an expected full-year surplus of 974,000 ounces.
(By Eric Onstad; Editing by Josie Kao)
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