Supply Deficit in Platinum Rising, the Metal is +22% YTD

Supply Deficit in Platinum Rising, the Metal is +22% YTD

Supply Deficit in Platinum Rising, the Metal is +22% YTD

$PPLT, $ANGPY, $IMPUF, $LNMIY

Platinum futures trading on the NYMEX market in New York contracted a bit last week, but at 1,065 oz YTD platinum is up more than 22% thanks to predictions of another annual market deficit and the threat of labor action in top platinum producer South Africa the source 73% of global annual supply.

In its latest Quarterly report the World Platinum Investment Council (WPIC) adjusted the supply deficit forecast for Y 2016 upwards by 16% or 65,000 oz to 520,000 oz, from 455,000 oz previously, mostly on the back of lower than expected recycling growth.

Y 2016 is set to the 5th annual year of market shortages for platinum, used mainly in jewelry and automobile catalysts.

Positive sentiment has reduced the reasons and desires of holders to sell platinum to meet deficits

Total demand for Y 2016 was expected to increase moderately year on year to 8.25-M oz. Total investment demand is forecast at 350,000 oz, + 45,000 as bar and coin demand remains strong and after ETF net sales tapered in 1-H of this year.

Automotive demand is expected to be largely static as is jewelry demand, + 5,000 oz in Y 2015 driven by growth in India, the US and Western Europe offsetting declines in China and Japan, according to the WPIC.

Total mining supply was forecast to fall 3% to just under 6-M oz. Annual supply from South Africa has fallen from a high of nearly 6-M oz 10 yrs ago to an expected 4.2-M oz in Y 2016.

A significant factor that has been putting a lid on price rises is the amount of above ground stocks of the precious grey metal, usually vaulted investor holdings, but the WPIC says these have more than halved over the 5 years of supply deficits and is expected to have fallen to 1.87-M oz this year. The authors of the report note that “positive sentiment has reduced the propensity of holders to sell platinum to meet deficits.”

South African mine production figures for July released today showed PGM output fell by 10.8% compared to June and 8.2% Y-Y as miners close down unprofitable mines and safety stoppages halt operations.

Last week South Africa’s top labor union for mineworkers in the industry said no deal was reached after more than a month of talks.

The Association of Mineworkers and Construction Union (AMCU) declared a dispute on wage negotiations with the Top 3 global producers Anglo American Platinum (OTCMKT:ANGPY), Impala Platinum (OTCMKT:IMPUF)and Lonmin (OTCMKT:LNMIY), which together account for 60% of global platinum output.

AMCU led a bruising 20-week strike in the first half of 2014 that lit a fire under platinum prices after some 1.3 million ounces of production was lost.

Symbol Last Trade Date Change Open High Low Volume
NYSEArca:PPLT 102.2 9 September 2016 -1.79 103.2 103.2 102.02 41,000
HeffX-LTN Analysis  for PPLT: Overall Short Intermediate Long
Neutral (-0.09) Bearish (-0.29) Neutral (-0.21) Neutral (0.22)

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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