Platinum Shortage on the Horizon

There’s a significant platinum shortage on the horizon according to an industry report.

According to a quarterly report released by the World Platinum Investment Council, a resurgence in demand for platinum jewelry, increasing industrial demand, along with falling production, will lead to a shortfall of 275,000 ounces in 2018.

According to Reuters, this would mark the sixth straight deficit year for the platinum market, and reduce above ground stocks to 1.605 million ounces by the end of next year.

“For five years these stocks have been feeding deficits … it does appear the platinum market is much tighter than it’s ever been in the last five or six years,” WPIC head of research Trevor Raymond said.

The WPIC report projected platinum demand will rise 2% to 8.030 million ounces next year after falling 6% in 2017 to 7.845 ounces.

Platinum prices have risen 5% this year.

Platinum and palladium are both important components in catalytic converters. Platinum is used primarily in diesel engines. Palladium is more common in gasoline engine emission systems. The palladium market is experiencing a similar supply and demand squeeze. Its price hit a 16-year high earlier this year.

Analysts say an increasing demand for platinum jewelry, particularly in India and China, will help push up overall platinum demand. The WPIC expects a 3% increase in jewelry demand. This will mark the first increase since 2014. A rebound in demand from the petroleum and glass sectors is projected to raise industrial usage by 9%.

Meanwhile, platinum production is expected to fall by 1% in both 2017 and 2018. According to the WPIC, output in South Africa will drop 2% due to mine closures. The country produces more than half the world’s platinum supply.  Raymond told Reuters years of low capital investment will keep output at low levels into the near-future.

Decline is likely to continue, and more importantly, the ability to increase output is extremely low. It takes a lot of time to get output to increase.”

Platinum is also an investment metal. The US Mint produces a 1-ounce Platinum American Eagle bullion coin. The Royal Canadian Mint also produces a .9995 platinum coin bearing a leaf design similar to its gold and silver counterparts.

The platinum market is much more volatile than gold and silver, but it could serve as an excellent diversifier for your precious metals portfolio. Call 1-888-GOLD-160 to talk to one of SchiffGold’s precious metals specialists today to learn more about investing in platinum.

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Photo by Rob Lavinsky