Platinum prices have risen this year by nearly 10% so far as the strikes in South Africa, which lasted nearly 22 weeks, are expected to cause the largest ever supply deficit on that market. According to Johnson Matthey supply in 2014 will drop by nearly 7%, while demand is forecasted to rise by 3%. That is why the platinum supply deficit should widen to 1,2 mln ounces, that is to more than 15% of an annual supply.
Supply deficit and mine strikes in South Africa are nothing new for the investors on the platinum market. However, after the recent events and due to its scope and duration many large mining companies consider halting its investment projects in mining sector in South Africa. That is why with global demand on platinum accelerating (recovery of auto sales in Europe and solid rise of auto sales in the US) next few years may bring even much higher deficits on the market.
Conclusions
We expect that platinum prices should perform better than those of any other precious metal. Despite the highest ever forecasted supply deficit, prices are still far from record highs.
Even if a stronger dollar and higher rates in the US cause a downward pressure on precious metals prices, platinum may be resistant to those factors, as investment demand accounts for only 7% of the overall demand.
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