JOHANNESBURG (miningweekly.com) – China’s import of platinum has led to a platinum supply shortfall, according to independent precious metals consultant Dr. David Davis.
The supply and demand forecasts presented to the market do not paint the full picture, Davis argues in a 17-page analysis published by Singapore-based Auctus Metal Portfolios.
This has led to the contradiction of global markets registering large surpluses while displaying distinct tension, he points out.
If Chinese imports are taken into account, global air stocks are significantly above the indicated level, according to its calculations. (See attached graphic.)
Surface stocks in China are broadly immobile in the sense that they are imported but not exported, and Davis finds that the correct equation for calculating stock is not recognized, namely that stock equals imports minus demand minus exports.
The claim that China’s platinum imports continue to greatly exceed identified demand is consistent with commentary from the World Platinum Investment Council (WPIC), which estimated 2021 “excess/unexplained” imports at around 1.3 million. ounces, a far greater number than the estimated global platinum surplus of 769,000 ounces in 2021. The WPIC further stated that even if the flow of excess imports into China had not been factored into its supply and demand analyses, high rental rates as well as shrinking New York Mercantile Exchange inventories suggested that China would continue to import more than it used – “a very big engine that puts a “bit of contradiction” in a market that is in massive surplus, but the market is tight”.
Moreover, the additional loadings of autocatalysts, the rapid development of hydrogen fuel cells and green technologies are poised to increase the demand for platinum group metals, as is the price mismatch between palladium and platinum, which is driving original equipment manufacturers to replace palladium with platinum in gasoline engines. combustion vehicles.
Under these circumstances, Davis expects China to continue to further increase its platinum inventory, especially when the price of platinum is falling.
In doing so, he anticipates the likelihood of it becoming an upside price risk in the medium to long term, “as China would literally suck platinum out of the system, which, in turn, would further contribute to a tightening of the platinum market. , which would put upward pressure on the price of platinum.”
The global supply of platinum mines is highly dependent on supply from South Africa (72%) as well as Russia (12%). Supply from North America (6%) and Zimbabwe (7%) is small in comparison.
“This distortion in the distribution of regional supply becomes strategically important if the supply of platinum to the South African platinum mining industry declines and if exports of platinum and palladium from Russia to the West are blocked by UK, EU and US sanctions,” says Davis, noting that South Africa’s platinum industry has in the past faced power shortages, rising costs, protracted industrial action and increased community action.
In 2021, platinum mining companies began investing in reserve replacement, but Davis describes the amount of investment as unlikely to prevent the overall decline in platinum supply or bring platinum markets back. to surplus so soon.
Davis’ research is based on an audited world trade database compiled by the United Nations Comtrade International Trade Statistics Division, which provides annual information on platinum imports and exports by country, as well as demand data published by a range of other recognized demand data providers.