Platinum price to remain under pressure – report

Thomson Reuters today released “GFMS Platinum & Palladium Survey 2015”, looking at the shifts and developments in the global Platinum Group Metal markets, their fundamentals and their drivers, over the past year and setting the scene for future.

  • This year’s Survey recorded the platinum market last year in a deep deficit (prior to inventory movements) of 1.02 Moz, singularly owing to major strike-related production stoppages in South Africa.  This situation was lessened though by stock movements and prior allocation of inventory; both the miners and consumers entered the strike well positioned to handle lower refinery outturn.  The deficit in 2014 follows seven years of market surplus out of the past eight years and is expected to be sustained, albeit at lower levels, in 2015.
  • Palladium, on the other hand has been a market in deficit since 2007.  The GFMS team estimate the palladium market deficit last year at 1.58 Moz, representing the most severe market imbalance for more than a decade.
  • Average platinum price is forecast to fall by 16% year-on-year, averaging $1,170/oz, only 3% higher than current spot prices.  This suggests a closing of platinum’s discount to gold.
  • Average palladium price is forecast to be broadly flat year-on-year at $800/oz, modestly above current spot prices.


  • Platinum mine production fell sharply in 2014, by 21%, to at least a 15‑year low of 4.70 Moz (146.1 t).  The decline was almost entirely due to significant strike action in South Africa, championed by the Association of Mineworkers and Construction Union (AMCU), which led to the idling of 60% of the South African industry for a period of 22 weeks.  We estimate that losses over that period, including the ramp up of operations, totalled 1.36 Moz (42.1 t).  While this was a disastrous year for South Africa in terms of platinum output levels, it could have been worse at the level of corporate profitability, given the knock on effect of the strike on producer costs and continuing strong labour cost inflation.  Substantial benefit did come, however, from the 13% depreciation of the rand against the dollar.  Nevertheless, costs in South Africa grew by 5% last year.
  • Jewellery scrap return rose by 5% in 2014 to 0.52 Moz (16.1 t) despite the near $100 drop in the platinum price.  A 7% rise in China coupled with a 4% increase in Japan accounted for the bulk of the gain.  In the latter, a weaker yen drove domestic prices higher which encouraged profit taking, while in China, supply chain destocking and an increase in recycling facilities accounted for the rise.  North American jewellery scrap retreated by 8% as consumers held out for higher prices.
  • Autocatalyst scrap grew by 1% in 2014 to its highest recorded level, at 1.06 Moz (32.8 t).  Solid growth was reported in all areas barring North America, where a 16% fall negated the majority of the gains seen elsewhere, ascribed to the US market being particularly sensitive to lower prices, with some stockpiling of material.
  • Turning to demand, global vehicle production rose by 2% to reach 90.5M units in 2014, with modest growth reported in most regions.  The key factor behind this was improving market sentiment in Europe with correspondingly higher vehicle production.  This was coupled with a continued tightening of emissions legislation in many countries, particularly in emerging markets, as air pollution becomes a more political issue in Asia, leading to a rise in metal use on a per unit basis.  These factors pushed demand for platinum in autocatalyst applications up by 4% to 3.00 Moz (93.4 t), the fastest rate of growth since 2011.  However, total consumption remained 26% below 2007’s all‑time high.
  • Jewellery fabrication retreated for the first time in three years, slipping by 3% to an estimated 2.57 Moz (79.9 t).  The decline came mainly from the two largest markets, China and Japan, where offtake contracted by 5% and 2% respectively.  Both fell in concert with a weaker domestic economy, which curtailed consumer sentiment and discretionary spending.  Similarly, in Europe, demand dropped by 3% as a weak economy and limited marketing for platinum jewellery impacted sales.  In contrast, platinum jewellery demand in North America increased by 3%, benefiting from a more robust economy and lower prices that saw domestic consumption enjoy a healthy rise.
  • Despite the glass sector becoming a net supplier of platinum to the market due to closures in Japan, platinum demand across the other major industrial segments was up strongly in 2014.  We estimate that platinum consumed in the chemical sector expanded by 36% last year to a record high of 0.59 Moz (18.3 t).  This impressive gain was boosted by increased paraxylene capacity, predominantly in Japan and China.  Petroleum demand returned to growth, increasing 30% last year.


  • Mine production of palladium posted a more robust outcome than platinum, yet nevertheless fell by 7%, to total 6.04 Moz (187.8 t), a 12‑year low.  Again the main driver was heavy strike-related losses in South Africa, although the decline there was dampened somewhat by pipeline timing effects and from a shift in mined ore mineralogy to more palladium rich sources at the expense of platinum.  Russian production provided a partial offset, growing by 3% due to the release of in-process palladium inventory, while production in Zimbabwe also grew by 3%.
  • Autocatalyst scrap supply increased by 8% in 2014 to set a third consecutive annual record at 1.72 Moz (55.2 t) as higher loadings levels continue to filter through into higher scrap yields.  Growth was seen in all regions, barring Japan, with Europe responsible for over 55% of global growth of 0.13 Moz (4.1 t).  North America remained the prime source of supply with a 59% market share; however this was the continent’s lowest share of supply since our series began in 1999.
  • Jewellery scrap supply rose by 8% to 0.25 Moz (7.7 t) in 2014, falling just short of the 2011 record.  China continued to dominate (at almost 80% of the total) and registered a 9% rise, with higher prices and supply chain de‑stocking accounting for the bulk of the rise.
  • Palladium demand in autocatalysts grew by 5% to 6.61 Moz (205.4 t) with growth in China leading the way in percentage terms and bringing the country’s market share to 23%, up from 11% six years ago.  Positive vehicle sales and continuing after treatment installations in emerging markets played a key role, as emissions regulations tightened around the globe.  While substitution of platinum to palladium remained a feature of the sector in autocatalysts, the rate slowed.
  • Palladium demand in industrial applications exhibited a mixed performance in 2014, with demand slipping by 3% to an estimated 2.46 Moz (76.5 t).  Electronics, as the largest category in this bloc, fell by 1% to a four‑year low as the industry continues to deal with ongoing miniaturisation losses and a shift to mobile devices away from traditional PCs.  Dental offtake declined by 10% in 2014 due to the continued slide in Japanese demand and further substitution losses in North America, while usage in the chemical industry also marginally declined, with a deceleration of purified terephthalic acid (PTA) capacity growth a key factor.  Elsewhere, demand for palladium in the petroleum sector rose by 23% last year, aided by an uptick in North America for fresh catalysts.
  • Jewellery demand fell for the sixth consecutive year, by 9%, to 0.47 Moz (14.7 t), the lowest level since 2004.  This was mostly due to China, where offtake last year dropped by 16%, although this was the smallest fall since 2009.

Commenting on the future market dynamics, William Tankard, Research Director – Mining at Thomson Reuters, highlighted, “It appears to us that forward buying programmes by the automotive sector are developing increasing levels of flexibility for these consumers to purchase metal when they want to, rather than need to; the sector is becoming increasingly price-sensitive.  Without enduring production cuts to be achieved, by permanently closing high cost mines, the platinum market is expected to return to surplus next year.  Of course, it’s a huge challenge as a producer to make that call, incur restructuring costs and permanently close capacity, if you believe the price will recover in the short- to medium-term.”


All content provided in this publication is owned by Thomson Reuters and/or its affiliates (the “Thomson Reuters Content”) and protected byUnited States and international copyright laws. Thomson Reuters retains all proprietary rights to the Thomson Reuters Content. The Thomson Reuters Content may not be reproduced, copied, manipulated, transmitted, distributed or otherwise exploited for any commercial purpose without the express written consent of Thomson Reuters. All rights are expressly reserved.