The markets for PGMs have once again been extremely volatile over the past twelve months. Global auto sales are strong with over 80 million light duty vehicles sold both in 2012 and 2013. The European economy showed signs of recovery late in 2013. As the largest diesel focused market, weak car sales in Europe since 2008 have negatively impacted platinum demand. European auto sales have stabilized and are showing signs of growth in the months ahead which will likely help to support platinum demand and prices.
The platinum market experienced a 375,000 ounce deficit in 2012 with that deficit expected to increase further in 2013 to 605,000 ounces. Total demand for platinum in 2012 was 8.05 million ounces with 2013 demand expected to increase to 8.42 million ounces. Strong demand has been underpinned by growth in ETF buying, Chinese jewelry demand and strong industrial use.
Supply growth for platinum has been marginal over the past several years. In 2012 primary supplies of platinum at 5.64 million ounces were at a twelve year low with South African sales down by 16% to 4.10 million ounces. Supply is expected to rise marginally in 2013 to 5.74 million ounces.
The South African platinum industry has seen a substantial drop-off in supply related to labour disruptions and safety stoppages. A number of marginal mines have closed and this trend is expected to continue. Anglo Platinum, the world’s largest producer, has introduced a restructuring plan that will see several underperforming mines close leading to a smaller production base.
The South African Rand has been extraordinarily weak since early 2013 capping USD denominated metal prices.