Platinum market may see first surplus in six years in 2017: JM

LONDON (Reuters) - The platinum market could return to surplus for the first time in six years in 2017 as lower autocatalyst loadings and weakness in Chinese jewelry buying pull demand lower, refiner Johnson Matthey said in a report on Monday.

Platinum bars are stacked at the safe deposit boxes room of the ProAurum gold house in Munich, Germany March 6, 2014. REUTERS/Michael Dalder/File Photo

Mine supply is expected to be flat next year, but supply of recycled metal from autocatalysts has the potential to rebound, it said.

“In most industrial sectors, the demand outlook remains firm, but purchases in the autocatalyst industry are likely to dip slightly as lower-platinum-loaded catalyst systems are introduced in increasing numbers in European vehicles,” it said.

“As demand in the Chinese jewelry sector seems set on a downward trend, market balance will likely depend on the extent of growth in autocatalyst recycling and the level of physical investment. Unless the latter remains at similar levels to those seen in 2016, we could see the platinum market return to a surplus for the first time since 2011.”

The platinum market likely recorded a shortfall of 422,000 ounces this year, JM said. Platinum supply is expected to have grown marginally as lower output in major producer South Africa was counterweighed by gains elsewhere and growth in recycling.

Autocatalyst demand is forecast to have grown just under 2 percent, driven by gains in Europe as carmakers factored in tighter European emissions legislation. Physical investment in platinum bars in Japan is expected to have remained strong.

However, the Chinese jewelry market, typically the largest single segment of demand, saw further weakness, putting global jewelry demand on track to fall 9 percent.

The market for platinum’s sister metal palladium is tipped to post a 651,000-ounce deficit this year, as autocatalyst demand rose to a record 7.84 million ounces. Mine supply is set to be flat, while investors are expected to have continued to sell out of palladium.

However the market will likely see another big shortfall next year even if investors continue to withdraw, JM said, as mine output is constrained while autocatalyst and industrial demand rises.

“With demand in industrial sectors looking set for a strong year, driven by significant capacity expansions in the Chinese chemicals industry, the palladium market looks likely to record another year of significant deficit in 2017, even if physical investment remains firmly negative,” it said.

Reporting by Jan Harvey, editing by David Evans