The platinum market is set for its third consecutive year of deficits, as supply constraints and weak recycling rates have driven the forecasted shortfall of this valuable commodity by over 50%.
The latest report from the World Platinum Investment Council (WPIC), the deficit in 2025 will be as much as 848,000 ounces, instead of the earlier estimate of 539,000.
"The key takeaway is that the deficit we're expecting in 2025 is of such a magnitude that, even if geopolitical and economic uncertainties were to prove massively damaging to demand, they wouldn't be able to eliminate it," said Edward Sterck, WPIC's Director of Research.
WPIC sees the mine supply drop as much as 5% year-on-year, with refined production projected at 5.51 million ounces. Notable hurdles are reduced palladium-related output in North America and ongoing restructuring efforts in South Africa, the largest producing jurisdiction.
Many platinum producers grapple with the economic challenges of persistently low platinum group metal basket prices. Additionally, limited material from work-in-progress inventories is further constraining supply.
Meanwhile, platinum recycling remains weak due to a shortage of end-of-life catalytic converters, with total recycling output forecasted at just 1.5 million ounces, only slightly higher than 2024's 12-year low.
Geopolitical tensions are an additional pressure on the platinum market. Tariff uncertainties, particularly in the U.S., have influenced investment behavior, with market participants preemptively moving platinum into the U.S. to avoid potential import taxes.
This dynamic led to a surge in exchange-traded fund (ETF) holdings and exchange stocks, driving investment demand to record levels. Sterck noted that the fear of tariffs has created a "proactive shift" of metal into the U.S., which could have inflationary effects and potentially strengthen the U.S. dollar, further pressuring platinum prices – as commodities are denominated in U.S. dollars.
While WPIC sees the clear supply-side issues driving prices higher, there are notions that an easing demand might help alleviate some pressure.
The automotive sector, which accounts for around 80% of platinum demand – owing to metal's essential role in internal combustion engine vehicles- is expecting a decline in platinum demand by 1% in 2025. Furthermore, industrial demand for glass production is forecated to drop by 14%, particularly in China. Meanwhile, the jewelry market is expected to grow by 2%.
Investors will wait for the world's largest platinum producer, Anglo American Platinum (AMPLATS), to demerge from its parent company, Anglo American (OTCQX:AAUKF).
The demerger, scheduled for June 2025 pending shareholder and regulatory approvals, will see AMPLATS listed primarily on the Johannesburg Stock Exchange with an additional listing on the London Stock Exchange. Anglo American will retain a 19.9% stake in AMPLATS to manage flowback and ensure a smooth transition.
Price Watch: abrdn Physical Platinum Shares ETF (NYSE:PPLT) is up 6.53% year-to-date.
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