Platinum market deficit shrinks in second quarter

London - The platinum market deficit shrank in the second quarter, data from the World Platinum Investment Council showed on Tuesday, as rising mine supply and autocatalyst and jewellery recycling outstripped a much smaller increase in demand.

The supply shortfall in the platinum market is also expected to decline in the full year, the WPIC said, to 445 000 ounces from 785 000 ounces in 2014. The forecast deficit for 2015 was larger than May's estimate of 190 000 ounces, however, due to a rise in investment demand in the second quarter.

Platinum prices fell last month to their lowest since March 2009 at $940.50 an ounce, which has encouraged some buyers to move back into the market, the WPIC said.

Its data showed holdings of platinum-backed exchange-traded funds rose 45 000 ounces in the second quarter compared to a 50 000-ounce outflow in the first three months of the year.

"The institutions in South Africa, where the massive increase in ETF holdings occurred, are certainly looking at the lower price and reading into it, firstly their view on value, and secondly what that might mean for supply," the WPIC's director of research Trevor Raymond said.

Investment in platinum coins and bars rose to 60 000 ounces from 35 000 ounces in the last quarter, with Japanese buying increasing as a stronger yen made the dollar-priced metal more affordable.

Mine output rose to 1.52 million ounces in the last quarter from 1.36 million ounces in the preceding three months, the WPIC said. It is expected to reach 5.85 million ounces this year, up 12% on 2014 as production rebounds after last year's five-month strike among South African platinum miners.

However, that momentum is likely to fade if prices remain near current levels, it said.

"At current prices, most of the production in South Africa is losing money, so this is not a situation that can last for very long," WPIC chief executive Paul Wilson said.

The two largest demand segments, for platinum jewellery and emissions-cleaning autocatalysts, both saw declines in the second quarter. Jewellery consumption fell 11% to 665 000 ounces quarter on quarter, while automotive demand edged down to 875 000 ounces from 880 000 ounces.

In the full year jewellery demand is expected to fall 2% to 2.94 million ounces, though autocatalyst buying is forecast to rise 5%.

Jewellery recycling rose to 165 000 ounces from 120 000 ounces in the first quarter, while recycling of platinum from autocatalysts fell to 300 000 ounces from 315 000 ounces.

The WPIC said above-ground stocks fell 55 000 ounces in the second quarter to 2.325 million ounces, and are expected to decline to 2.165 million ounces by year end. These exclude ETFs, metal held by exchanges, or working inventories of mining producers, refiners, fabricators and end-users.