Platinum is expected to trade range-bound throughout 2023. On the one hand, price dips will provide decent entry points to take advantage of platinum’s longer-term strengthening fundamentals. (This is highlighted by China’s near-record imports over the last two years and the metal’s market balance facing its deepest deficit in more than a decade.) On the other, price gains will remain limited, as rising real rates and a faltering economic outlook will weigh on the metal, chiefly via its linkage to gold. Higher prices could also see exchange-traded product holders take profit and price-sensitive Chinese buyers ease back.
Platinum’s deepening deficit is driven primarily by growth in autocatalyst demand. While light internal combustion engine vehicle production is expected to be lacklustre, tighter emissions regulations in the heavy-duty diesel category will support higher loadings and increased demand. In addition, the rate of platinum for palladium substitution will support higher platinum requirements. Furthermore, platinum will benefit from greater offtake in the glass and chemicals sectors, although jewellery demand could stagnate, as Western losses counter growth across Asia. Mine supply faces several headwinds, creating upside price risks. In 2023, 71% of mined material will come from South Africa, which is currently plagued by load shedding, community disruptions and lower grades coming out of Mogalakwena.
Although we are not forecasting a price breakout, an annual average price of $1,020 marks a 6% increase year-on-year, which will bring the gold-platinum spread to almost $500 by year-end, well down from the $775 level seen during early January.