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Platinum Market is Broadly Balanced

Marcus Grubb, Director, Market Development, World Platinum Investment Council, broadly talks about the trend of platinum demand in 2017, benefits of platinum as investment metal, Council’s recent initiative to popular platinum globally and many more with Debajit Saha, Editor, Bullion Bulletin. Excerpts…

 

1.     What is your estimate of global demand of platinum in 2017? Who will be main drivers?

 

·         The latest Platinum Quarterly update, published on May 15, shows a continuation of the trends we observed at the end of 2016.

·         The platinum market is expected to be broadly balanced over the year, with a deficit of 65 koz in 2017 predicted.

                                          i.    While global demand is forecast to drop by 6% year-on-year, mining supply is predicted to fall further in 2017. The first quarter of the year saw total mine supply hit its lowest level since Q3 2014 (1,330 koz, down 6.3% year-on-year).

                                         ii.    The data supports the WPIC’s view that supply is becoming increasingly constrained as the effects of lower capital investment and rising real costs begin to have an impact

·         Automotive demand for 2016 and 2017 has been revised upward by 45koz.

                                          i.    The revisions reflect higher than expected global vehicle sales with increased loadings, while greater scrutiny of emissions is also believed to be limiting moves to thrift platinum loadings.

                                         ii.    We believe the game-changing C40 initiative, led by the Mayors of Paris and London, is likely to change automaker behaviour and that platinum will be an integral part of the solution that car makers turn to in 2017 and beyond

·         Platinum Quarterly also highlights a number of interesting developments in the investment demand segment:

                                          i.    Global platinum ETF holdings grew by 65 koz in the first quarter of 2017, with increases observed across most regions. ETF assets in the quarter were at their highest level since the fourth quarter of 2015.

                                         ii.    Bar and coin demand in the first three months of 2017 was supported by the minting of 20,000 one-ounce US American Eagle bullion coins, which sold out within three days in January.

                                        iii.    Overall platinum investment demand is projected to be 250 koz this year

·         Global platinum jewellery demand for the quarter increased 3% year-on-year, buoyed by increased Chinese retail sales this quarter. However, global jewellery demand for 2017 is forecast to slip 1% from 2016, with anticipated declines in China and Japan outweighing gains in India and other regions.

 

2.       What are the developing markets for platinum products - both investment grade products and jewellery – as per your council’s estimate?

3.        

·         The focus of the World Platinum Investment Council (WPIC), as our name suggests, is advancing investment in physical  platinum. In contrast, the Platinum Guild has a specific focus on platinum jewellery.   

·         We believe that there is considerable scope for increased investment in physical platinum and one of the ways the WPIC is supporting this is through the development of new market initiatives, making it easier to invest in the precious metal.All high quality product providers stand to benefit from greater retail investor engagement and participation in better developed and increasingly transparent markets.

·         Historically, physical platinum investment choices have been limited, restricting natural demand. We are now engaging with a number of key financial institutions and market participants around the world to develop new products, fill geographic and sector gaps, which will serve to stimulate further uptake of platinum by a broader range of investors.

·         India is definitely the market to watch. Demand for platinum products there is undeniably on the up - there was a 15% increase in jewellery demand last year compared with 2015, and this is expected to grow even faster in 2017.Recently, we announced an association with Muthoot Exim, the precious metals division of the 130-year old conglomerate Muthoot Pappachan Group, to launch India’s first platinum deity products. And we look forward to supporting further demand growth in the country in 2017.

 

4.       Can platinum replicate gold as an investment metal?

 

·         Platinum has many similar features to gold as an investment metal and a higher proportion of industrial uses thereby making it a more useful metal, mainly due to its catalytic properties. Platinum has higher long term returns than gold with a slightly higher volatility. And platinum performs many of the functions that gold does in a portfolio of different investments, such as property and shares, and performs well during periods of economic recovery. 

·         We believe that platinum is under developed as an investment metal and has great potential to enhance investment portfolios beyond gold. Its price discount to gold currently sits at an historic low. And it has been at this level for the second longest period in 40 years. The long-term fundamentals supporting platinum suggest that this historical anomaly has to unwind. 

 

5.       You recently tied up with Bullion Vault to market platinum bars to be available to general investors to invest. Tell about this participation.

 

·         Our partnership with BullionVault is progressing extremely well.  Platinum on BullionVault was launched in March this year and has seen a significant take up by investors.  For the first time, investors are able to purchase vaulted platinum bars on BullionVault to as little as one gram at low commissions and very tight spreads. 

 

6.       You also joined hands with Singapore Bullion Market Association to promote retail and investment grade platinum products in 2016. How is Singapore market doing at present? What are other new markets you are looking at which could be served from Singapore and have the potential to grow for investment grade platinum products?

 

·         The WPIC joined the SBMA in January 2016 in order to support the growth of Singapore as a hub for precious metals in Asia and to promote and educate the market about platinum. 

·         The investment market is progressing well in Singapore with volumes of platinum investment on the increase. Some Singapore-based businesses are also expanding their operations and partnerships to other countries in the region to sell precious metals, including platinum.

 

7.       WPIC has also partnered with companies like Muthoot Exim in India, Royal Mint in London, Japan Physical Platinum ETF managed by Mitsubishi UFJ Trust and Banking Corporation, etc. How are these partnerships working?

 

·         As part of a portfolio of market development transactions around the world to boost platinum investment demand, the WPIC has entered into agreements with Muthoot in India, The Royal Mint in the UK and Mitsubishi in Japan.  Whilst some of the details of these transactions are confidential, I can provide some further information. 

·         The partnership with Muthoot, one of the largest gold loan NBFC’s in India, involves the launch of a platinum savings scheme using platinum deities, and in time other platinum investment products.  The pilot is ongoing across India in over 620Muthoot branches and the intention is to expand it later this year. 

·         The comprehensive agreement with the Royal Mint covers a range of platinum products in the coin and bar space and has already got off to a favourable start. 

·         The partnership with Mitsubishi to assist in marketing the Fruits of Platinum ETF has been underway since 2016 and whilst ETF assets move up and down, it has already delivered significant incremental ounces from growth in the ETF.

 

Disclaimer: Views are personal and not the views of the publisher.