Platinum: Market stays undersupplied but demand softens – Commerzbank

⦿ Executive Snapshot

• What: The platinum market is projected to remain undersupplied despite a softening demand outlook.
• Who: Commerzbank analyst Carsten Fritsch and the World Platinum Investment Council (WPIC).
• Why it matters: The ongoing supply deficit and fluctuating demand have significant implications for platinum prices and investment strategies in the precious metals market.

⦿ Key Developments

• The WPIC expects a platinum supply deficit of 297,000 ounces for the year, marking the fourth consecutive year of deficits.
• Above-ground stocks are projected to fall to 1.747 million ounces, leading to a stock-to-use ratio of 22%, covering demand for less than three months.
• In Q1, the platinum market recorded a supply surplus of 268,000 ounces for the first time in six quarters, contrasting with a deficit of 658,000 ounces in the same quarter the previous year.
• Platinum demand is anticipated to drop by 9% in 2023 to a four-year low of 7.674 million ounces, significantly impacted by reduced investment demand.
• Commerzbank forecasts platinum prices to rise to USD 2,300 per ounce by year-end, driven mainly by higher gold prices rather than platinum-specific strength.

⦿ Strategic Context

• Historically, the platinum market has experienced several years of supply deficits, indicating a persistent imbalance between supply and demand.
• The recent shift towards a surplus in Q1 may signal a changing market dynamic, potentially impacting future pricing and investment strategies.

⦿ Strategic Implications

• The immediate consequence of the ongoing supply deficit may lead to increased volatility in platinum prices, particularly if demand continues to weaken.
• Long-term implications include potential shifts in investment strategies, especially regarding platinum ETFs and other investment vehicles, as market participants adjust to changing supply and demand dynamics.

⦿ Risks & Constraints

• Regulatory or market execution risks could hinder the recovery of demand, particularly in investment sectors reliant on platinum.
• Competition from alternative investments and commodities may further suppress platinum demand, impacting its market position.

⦿ Watchlist / Forward Signals

• Observing upcoming WPIC reports for updates on supply/demand forecasts will be crucial for market participants.
• Tracking platinum and gold price movements will provide insights into market trends and potential investment opportunities in the precious metals sector.