The coronavirus pandemic has had a significant adverse effect on the platinum market. It struck the commodity’s prices, demand, and supply. However, the outlook for the year is better than expected.
The World Platinum Investment Council (WPIC), published its platinum quarterly for the 1Q of 2020, which includes an updated forecast of this year. According to WPIC, 2020 will have a surplus of 247 000 oz of platinum. This means that despite the impacts of the coronavirus pandemic, it is only 128 000 oz higher than the previous forecast.
Analysts expect the demand in 2020 to be 18% lower than last year. This is a result of weak jewelry and automotive sales and more economic investment demands. The supply should decrease 13% year on year.
During March, the platinum price dropped between 10% and 35%. This attracted active attention to purchasing from China and coin investors.
On March 19, platinum sold at $590/oz. SFA Oxford said in a report last week that it was a possible platinum price scenario. If manufacturers do not use platinum for catalysts or jewelry and investment is becoming exhausted, the platinum price could quickly sink below $600/oz later this year. However, the metal might trade at $680/oz over the next six months, it added. According to SFA Oxford, the platinum market was expected to have a surplus of 1.3 million oz. Last year, investors bought up the excess. Still, exchange-traded funds were down 350,000 oz so far this year, so a repeat performance is looking unlikely, it said.
The implementation of more powerful automotive emissions legislation is expected to increase platinum demand
This year, analysts forecast the total automotive demand for platinum to drop by 14%. However, despite the effects of coronavirus, the market for automotive in China should climb by 14%. The standards for heavy-duty loading vehicles encourage a growth in loadings that surpasses the expected drop in units produced.
Furthermore, the implementation of the Bharat VI legislation in India is also likely to boost demand for platinum.
Paul Wilson, WPIC CEO, stated that coronavirus had presented a rare situation for the platinum market. It had severe and adverse effects on demand and supply. It will still be the center of attention for the coming months; yet, there is the potential for increasing demand and the metal’s value. Wilson said the potential for growth of demand is likely to live longer after the coronavirus pandemic resolves.
Platinum demand mainly arises from the automotive, industrial, medical, and chemical markets. The metal has unique chemical and physical characteristics. Because of its silver-like appearance, it is often used in jewelry. In the last five years, its use from autocatalysts has been between 36% and 43% of the total demand. Other industrial applications of the metal account for 23%.
Over five years, global yearly jewelry demand has totaled 31% of the entire platinum demand. Investment is the smallest category of platinum demand. However, it has been the most significant variable over the past five years, varying between 0% and 15% of total demand.
