The global platinum market recorded its third consecutive significant structural deficit last year, and we should expect these supply shortfalls to continue for the foreseeable future, according to the World Platinum Investment Council (WPIC). Platinum demand exceeded supply by 995,000 ounces last year, 46% more than expected.
The WPIC expects a market shortfall of around 848,000 ounces in 2025.
Last year, total supply increased by 3 percent, but was unable to keep pace with growing demand.
Surprisingly, platinum demand increased despite falling automotive demand. According to WPIC, platinum use in the automotive sector fell by 2 percent to 3.1 million ounces as global car and truck production declined by 2 percent and 5 percent, respectively.
Automotive demand accounts for around 80% of total platinum production. However, according to Edward Sterck, director of research at WPIC, automotive demand would have to fall by 30% to offset the decline in supply.
Meanwhile, platinum jewelry sales grew 8 percent in 2024 and investment demand took off, rising 77 percent.
WPIC forecasts jewelry demand will reach 2 million ounces this year, up 2 percent year-on-year. It would be the first time consumption has exceeded 2 million ounces since 2019.
Platinum mine production grew modestly by 3 percent in 2024, but is expected to fall by 5 percent in 2025.
Above-ground platinum reserves declined 23 percent last year and are forecast to decline another 25 percent this year. This represents less than four months of demand.
Recycling has failed to help fill the supply shortfall as expected.
"Automotive recycling remains extremely weak due to the continued shortage of end-of-life catalytic converters, with total recycling at 1,496 koz, only 10 koz higher than the 12-year low recorded in 2024, " according to WPIC's Platinum quarterly report.
Given the current dynamics, platinum may be significantly undervalued.
The current platinum price hovers around $1,000 an ounce. To put this in perspective, platinum reached an all-time high of $2,213 per ounce in March 2008. This surpassed the record price of gold in 2011.
Prior to 2011, platinum was generally more expensive than gold. In 2015, this historical trend reversed, with a wider spread between gold and platinum.
It remains to be seen whether platinum will regain the price parity with gold that we saw prior to the mid-2010s, but given the supply and demand dynamics, it is reasonable to be optimistic about platinum in the short to medium term. Given the price disparity with gold, this could indicate a buying opportunity.
Mike Maharrey, Money Metals