Platinum price: S. Africa output jump will push oversupply to 6-year high

Mining in South Africa. Photo from The Minerals Council South Africa’s Facebook page.

On Wednesday, platinum futures were in retreat again, sliding to $832 an ounce after a new study predicted the largest market surplus in at least six years for 2019. In January, the precious metal dropped to near 14-year lows.

A new report by the World Platinum Investment Council (WPIC) predicts the platinum market moving into a surplus of 680,000 ounces in 2019 after a surplus of 645,000 ounces last year.

A rise in consumption for the first time since 2015 this year will be offset by a 6% increase in mine-level output to 6.46m ounces on top of a 3% boost to recycling. Platinum is mainly used in autocatalysts to scrub emissions and in jewellery fabrication.

Automotive demand is projected to fall at a far slower rate than in 2018

The WPIC said supply growth would come mainly from the release of material stockpiled by mines and smelters in South Africa during upgrades and maintenance over 2017 and 2018. South Africa supplies more than 70% of the world’s mined platinum and output will hit 4.725m ounces in 2019.

Expansion in the US is expected to lift North American supply by 50koz to 410koz. Output from Zimbabwe and Russia is expected to remain stable at 470koz and 675koz respectively.

Platinum price: S.Africa output jump will push oversupply to 6-year high

Source: World Platinum Investment Council

Platinum demand has been under pressure since 2015 following the Volkswagen diesel-engine emissions cheating scandal in the US. WPIC says automotive demand is projected to fall at a far slower rate than in 2018, declining 3% year-on-year to 3m ounces in 2019, compared to a 7% decline in 2018.

In contrast to platinum, palladium used in gasoline engines, continues to attempt fresh all-time highs, trading at $1,466 an ounce on Wednesday, up more than 60% compared to this time last year.

The last time platinum traded at this deep discount to sister metal palladium was in 2001. In 2008, platinum was at a $1,750 premium to palladium. As for the relationship with gold, platinum was still trading near par in February last year.

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