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Russia risks speed up automakers' switch from palladium to platinum, WPIC says

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LONDON — Automakers are accelerating

efforts to use less palladium and more platinum due to worries

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over palladium supply from Russia, the World Platinum Investment

Council (WPIC) said on Monday, predicting a large surplus in the

platinum market this year.

Automakers were already shifting to platinum, which is

cheaper than palladium, to save money, but a faster transition

would increase platinum demand and could lift prices while

having the opposite effect on palladium.

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Russia accounts for around 25-30% of the world’s supply of

palladium and around 8-10% of its platinum.

There is no sign that Russian exports have been curtailed by

sanctions on the country since it sent troops into Ukraine in

February but with the war dragging on, more companies may

boycott Russian metal and governments could impose restrictions.

“The substitution effort has gone up hugely,” said Trevor

Raymond, the WPIC’s head of research. “The amount of savings an

automaker can make are massive. What’s been added on top of that

is concerns about availability (of palladium).”

At around $950 an ounce, platinum costs around half as much

as palladium. Automakers use around 2.5-3 million ounces of

platinum each year and around 8.5 million ounces of palladium.

In its latest quarterly report, the WPIC said the roughly 8

million ounce a year platinum market would be oversupplied by

627,000 ounces this year following a surplus of 1.13 million

ounces in 2021.

In March, it forecast a surplus for 2022 of 652,000 ounces.

During the January-March quarter, platinum demand fell

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26%year-on-year and supply fell 13%, leaving the market

oversupplied by 167,000 ounces, the WPIC said.

It said that for the full year, supply would be 5% less than

in 2021 and demand would be 2% greater, with auto industry

demand rising 16% due to an increase in light duty vehicle

production, higher loadings per vehicle to meet tighter

emissions regulation and substitution from palladium.

Following are supply and demand numbers and comparisons.

ANNUAL PLATINUM SUPPLY/DEMAND (‘000 oz)*

2021 2022f 2022f/2021

% change

SUPPLY

Refined Production 6,297 5,872 -7%

Producer Inventory +/- -93 0 -100%

Recycling 1,953 1,909 -2%

TOTAL SUPPLY 8,156 7,781 -5%

DEMAND

Automotive 2,643 3,055 16%

Jewellery 1,923 1,886 -2%

Industrial 2,508 2,109 -16%

– of which chemical 688 613 -11%

– Petroleum 172 193 12%

– Electrical 135 127 -6%

– Glass 715 331 -54%

– Medical 244 257 5%

– Other 555 588 6%

Investment -45 104 -331%

– Bars, Coins 332 254 -23%

– ETF Holdings -238 -50 -79%

– Exchange Stocks -139 -100 -28%

TOTAL DEMAND 7,029 7,155 2%

MARKET BALANCE 1,128 627 -44%

Above Ground Stocks 3,752 4,379 17%

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QUARTERLY PLATINUM SUPPLY/DEMAND (‘000 oz)*

Q1 2021 Q4 2021 Q1 2022 Q1/Q1 %

change

SUPPLY

Refined Production 1,465 1,695 1,279 -13%

Producer Inventory +/- -29 -39 0 -100%

Recycling 518 453 415 -20%

TOTAL SUPPLY 1,953 2,109 1,695 -13%

DEMAND

Automotive 724 680 725 0%

Jewellery 479 499 437 -9%

Industrial 707 624 533 -25%

– of which chemical 119 200 111 -7%

– Petroleum 37 57 44 21%

– Electrical 33 32 30 -9%

– Glass 318 121 138 -56%

– Medical 57 67 65 15%

– Other 143 147 144 0%

Investment 159 -108 -167 -205%

– Bars, Coins 21 95 60 192%

– ETF Holdings 105 -155 -169 -261%

– Exchange Stocks 33 -48 -58 -273%

TOTAL DEMAND 2,069 1,695 1,528 -26%

MARKET BALANCE -116 413 167 -244%

* Source: World Platinum Investment Council, Platinum

Quarterly Q1 2022

(Reporting by Peter Hobson; Editing by Kirsten Donovan)

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