Page 20 - Bullion World Volume 02 Issue 02 June 2022_Neat

Bullion World | Volume 2 | Issue 02 | June 2022

Figure 1: Platinum lease rates have spiked, potentially presaging a period of sustained
gains in the platinum price, as seen in 2020.

Source: Bloomberg, WPIC Research

substitution for palladium in gasoline had been hugely boosted by high
catalytic converters on a one-for- palladium and rhodium prices. Bar
one basis over the past four years. and coin demand had a buoyant
Conservative estimates are that 2021 at 10 t after a stellar 2020
between 6 t and 12 t per annum of which saw bar and coin buying reach
substitution has already occurred, 18 t. The Wimbledon tennis
but the details remain proprietary Championships 2022 Platinum
and confidential to both automakers In other segments, the outlook for Toss Coins
and catalyst manufacturers. 2022 is broadly positive. Jewellery
demand is holding up relatively well mined platinum (c.10%), concerns
Investment demand for platinum despite supply chain challenges and could intensify automakers’ platinum
had a weak first quarter, however the negative impact from China’s for palladium substitution efforts and
some recovery is expected as the zero-COVID policy, with growth in all potentially modify procurement and
year progresses. In 2022, bar and regions outside of China. Industrial inventory management strategies
coin investment is expected to total demand will be lower than the record to the benefit of platinum. The
8 t, down 2 t from 2021 due to the levels of 2021, but is still expected WPIC believes that the wide range
price-driven cyclical sell-off in Japan to deliver the third strongest year on of sanctions against Russia could
partially offsetting stronger demand record. directly boost platinum for palladium
in Europe and North America. substitution in the near-term – even
Exchange traded fund (ETF) There are reasons to believe that above the levels already baked into
holdings are expected to reduce this year’s forecast surplus could 2022 forecasts.
by 2 t in 2022, a recovery from the reduce further. Mine supply is now
outflows of 5 t in quarter one. below 2019 levels and vulnerable to Factors such as metal scarcity, metal
further downward revisions driven by origin and inflationary concerns
To put this in context, investment operational constraints, COVID- and could also push end users of
demand in 2021 dropped to -1 t safety-related disruptions, and labour platinum to look for different supply
after an exceptionally strong prior and power shortages. Security of arrangements such as direct off-
year which saw high demand for supply concerns are increasingly take agreements from producers
physical assets in the wake of the coming into focus, too, in light of or the increase of buffer inventories
COVID-19 pandemic. ETF holdings Russia’s invasion of Ukraine and the to protect against possible supply
reached record levels in 2020, with impact of sanctions on Russia in disruptions.
inflows of 16 t, while net outflows response to the invasion.
of some 7 t were seen in 2021 as In this regard, it is worth noting that
investors rotated out of ETFs in Given Russia’s importance to the very recently – during the second
favour of platinum mining equities for global supplies of mined palladium week of May – the one-month
their attractive dividends; earnings (c.40%) and, to a lesser extent, platinum lease rate spiked to over

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