UBS Predicts Continued Platinum Shortage Beyond 2025

Platinum Market Outlook: A Challenge Ahead

The latest insights into the platinum market reveal a noteworthy trend that has market analysts talking. Despite facing a significant deficit of 661,000 ounces in the early part of the year, platinum prices have surprisingly dipped by around 6%. According to experts at UBS, this unusual situation can be largely explained by the fabrication balance, which considers the actual supply in relation to both industrial and jewelry demand, excluding any investment needs that can distort the picture.

Year-to-Date Production and Demand Analysis

Over the year, the cumulative fabrication deficit tallied up to 307,000 ounces, reflecting the complexities of the market. This deficit included a substantial shortfall of 336,000 ounces during the first quarter, a minor reduction of just 5,000 ounces in the second quarter, followed by a surprising surplus of 34,000 ounces in the third quarter. These fluctuations indicate the volatility characterizing the platinum ecosystem.

Investment and Industrial Demand Shifts

Looking specifically at investment demand, a notable decline of 226,000 ounces was observed in the third quarter, raising concerns about fading market fundamentals. This decline poses questions for long-term investors and market participants. On the production front, mines reported a 7% increase year-over-year in output, reaching 1.48 million ounces during the third quarter, primarily thanks to a recovery in South African mining activities, which had struggled previously due to power supply disruptions.

Sector-Specific Demand Trends

Examining the demand across various sectors paints a mixed picture. Industrial utilization of platinum surged by 15% year-over-year to 570,000 ounces; however, the glass sector has faced notably weak demand in the third quarter of the year. On the other hand, the automotive sector experienced a 3% dip in demand, landing at 750,000 ounces for the third quarter of 2024, largely influenced by a sluggish performance in the European market.

Jewelry Demand Shows Positive Growth

In brighter news, the jewelry sector showcased resilience, with a 7% increase in demand year-over-year, standing at 480,000 ounces. This marks the fourth consecutive quarter of growth in jewelry demand, offering some optimism in an otherwise mixed outlook.

Future Outlook: Continued Shortage Expected

As we look further into the horizon, both UBS and the World Platinum Investment Council (WPIC) project a persistent undersupply in the platinum market, with the WPIC estimating a shortfall of 539,000 ounces for the upcoming year. The projection serves as a critical insight for market participants who must navigate an evolving landscape.

Factors Influencing Ongoing Trends

UBS's analysis points towards a continued undersupply in the platinum market extending into 2025. Factors such as the slower adoption rate of electric vehicles are expected to sustain demand for autocatalysts that utilize platinum. Currently, hybrid vehicles, which combine an internal combustion engine with a catalytic converter, are gaining more popularity among consumers compared to fully electric alternatives, indicating a sustained demand for platinum in the near future.

Frequently Asked Questions

What are the main reasons for the current platinum deficit?

The major reasons for the current platinum deficit include increased industrial demand, a drop in investment demand, and fluctuating supply due to production challenges.

How has the automotive sector impacted platinum demand?

The automotive sector has seen a decrease in platinum demand due to a sluggish market, particularly in Europe, which affects the overall consumption of platinum for autocatalysts.

Are there any positive trends in the platinum market?

Yes, jewelry demand has seen a positive trend with a 7% increase, marking continuous growth over the past quarters.

What is UBS forecasting for the platinum market in the future?

UBS forecasts an ongoing undersupply in the platinum market, with projections suggesting a continued deficit into 2025.

How does the production of platinum compare year-over-year?

Platinum production has increased by 7% year-over-year, reflecting improved mining operations and recovery in key regions, particularly South Africa.

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