Platinum market faces decade-high supply shortage

I’ve written extensively about supply shortfalls in the silver market. Silver demand outstripped the supply of the metal for the third straight year in 2023.  But silver isn’t the only metal facing market deficits. Analysts expect the platinum market to chart its largest shortfall in a decade in 2024.

Platinum doesn’t get the same attention in investment circles as gold and silver, but the precious metal can serve a role in a broader wealth preservation and growth strategy. Investors comfortable with platinum's more speculative nature can use it to diversify a portion of their precious metal portfolio.

Platinum is rarer than gold by a 30 to 1 ratio. The metal is so rare that all the platinum ever mined could fit into a storage room measuring 25 feet by 25 feet.

Like silver, platinum is a multi-use metal.

Most platinum is used in industrial applications with the automobile industry consuming the lion’s share. The metal is an important component in catalytic converters. It is also used in the production of some chemicals, in electronic applications, and in the green energy sector. For instance, platinum-based glass fibers are used to minimize the weight of wind turbine rotor blades.

About 20 percent of the platinum supply is used in jewelry fabrication. Investment demand accounts for the rest of the annual offtake.

According to Johnson Matthey, a catalytic converter manufacturer, the platinum market deficit will grow to 598,000 ounces in 2024. Last year, there was a 518,000-ounce supply shortfall.

According to the World Platinum Investment Council (WPIC), the total platinum supply in the first quarter of 2024 was at the second-lowest level since the organization began compiling data.

Meanwhile, automotive industry demand for the metal hit a seven-year high. The auto sector consumed 832,000 ounces of platinum in Q1. The WPIC projects automotive platinum demand to grow by 2 percent to around 3.3 million ounces this year.

Platinum jewelry demand and investment demand are both expected to also grow in 2024.

The WPIC has raised its market deficit projection to 476,000 ounces.

"For the second consecutive year, the platinum market will post a meaningful deficit underscored by platinum's sustained demand and supply vulnerability amidst global economic challenges,” WPIC CEO Trevor Raymond said.

These supply and demand dynamics could signal a buying opportunity for investors. The platinum price has been flat just under $1,000 an ounce for nearly a year. Generally, sticky price inflation coupled with a supply shortfall could help drive the price of platinum higher.