Platinum Supply and Demand

The platinum supply and demand dynamic is currently in supply deficit.

Like silver, platinum demand is up and supply is down – yet the price has been falling.

Rarer than gold with growing industrial demand, platinum has been trading below the price of gold all year.

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Platinum Supply Demand – Surplus/Deficit

The platinum supply demand dynamic was in supply deficit in 2014 by about a million ounces due to a six month South African mining strike and steady demand.

Platinum Demand

Platinum demand comes primarily from automobile manufacturers, jewelry, the chemical petroleum refining and electronics industries. Industry analysts do not include platinum investment demand as part of overall demand partially because sales of platinum coins have been de minimus. In recent years however, platinum exchange traded funds (ETFs) and other exchange trade products (ETPs) have provided a boost, albeit inconsistent, to platinum demand.

Platinum Demand and Use 1980-2014

The biggest drivers of platinum demand are jewlery and automobile manufacturing.

Credit Suisse AG projects that the platinum supply demand dynamic will remain in deficit in 2015.

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Industrial Uses of Platinum

Industrial applications provide about 70% of the annual platinum demand.

Platinum Demand for Automobiles

Platinum is used in automobile catalytic converters that reduce Nitrogen Oxide emissions. Global platinum demand for use in catalytic converters rose from from 740,000 ounces in 1980 to 2,460,000 ounces in 2000 to 3,457,000 ounces in 2014.

The bulk of the gains in platinum auto demand has come from China where catalytic converters are being added to China's increasing auto fleet. China's platinum demand for use in catalytic converters has risen from 32,000 ounces in 2000 to an estimated 527,000 ounces in 2014.

Demand for platinum for use in automobiles constitutes about 45% of total demand.

Platinum Demand for the Chemical Petroleum Refining Industry

Platinum is used as a catalyst to up grade low octane petroleum based products to high octane ones. Global platinum demand for use in the chemical petroleum refining industry has risen from about 380,000 ounces in 2000 to approximately 640,000 ounces in 2014.

Demand for platinum for use in the chemical petroleum refining industry constitutes about 10% of total demand.

Platinum Demand for Electronics

Platinum is used as a coating on computer hard drives. As demand for computers shifts from desktop to tablets, mobile devices and lap tops, platinum demand in this sector is expected to decrease.

Demand for platinum for electronics decreased from about 300,000 ounces in 2000 to just under 200,000 ounces in 2014.

Demand for platinum for use in electronics about 3% of total demand.

Platinum Demand for Jewelry

Platinum is an attractive "white" metal that is prized for its rarety as much as for its beauty. Platinum rarely tarnishes and is hypoallergenic making it ideal for upper end elegant jewelry.

Platinum demand for jewelry grew from approximately 505,000 ounces in 1980 to approximately 2,200,000 ounces in 2014. The bulk of platinum jewerly demand comes from Asia. Japanese platinum jewelery demand peaked in the mid to late 1990's at over million ounces annually. Recent Japanese demand has fallen to about 200,000 ounces annually. The drop in Japanse platinum jewelery demand has been replaced by Chinese demand that has averaged over 1.2 million ounces from 2010-2014. Chinese platinum jewelry demand accounted for about 75% of overall platinum jewelry demand in 2013.

Demand for platinum for use in jewelry constitutes about 30% of total demand.

Other Sources of Platinum Demand

The remaining platinum demand comes from use in electrodes, anticancer drugs, fuel cells, dental applications, oxygen sensors, spark plugs and turbine engines.

Platinum Investment Demand

Platinum has no real monetary history other than a short period of time in the 19th century during which Russia minted platinum coins. Platinum recently, however, has been warehoused in vaults to satisfy ETF investment demand.

Platinum Exchange Traded Funds

Platinum ETF and ETP demand are not included in over all platinum demand. If they were, the deficit shown above would be even greater. Since 2007, approximately 2.5 million ounces have been added to platinum ETFs. Launched in early 2013, South Africa's Absa Capital's NewPlat ETF is the largest platinum ETF holding approximately 910,000 ounces of platinum.

ETF Securities Platinum ETF holds more than a half a million ounces of platinum.

Platinum held in ETFs and under other investment warehouse arrangements was over three million ounces as of early 2015.

Platinum ETF Holdings 2006-2015

Platinum ETFs hold more than one half a year's worth of global platinum mining production.

The ounces and value of platinum held in ETFs rose lock step from 2009 until the recent price drop.

Platinum Coin Demand

Global demand for platinum coins is low. Total North American platinum coin demand in 2013 was just over 44,000 ounces and 30,000 ounces in the Asia Pacific region.

Global Platinum Coin Sales 1983-2014

Platinum coin demand is fraction of one percent of overall platinum demand.

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American Platinum Eagle Coins

The United States Mint sold American Platinum Eagle coins from 1997-2008. Sales of these coins were relatively strong the first few years of mintage (approximately 250,000 one ounce American Platinum Eagle coins were sold from 1997-1999) but tailed off to under 10,000 one ounce American Platinum Eagles sold annually from 2003-2007. In 2008 the U.S. Mint sold 20,800 once ounce American Platinum Eagle coins. The American Platinum Eagle coin was also minted in 1/10, 1/4 and 1/2 ounce denominations.

The U.S. Mint brought back the American Platinum Eagle coin in 2014 and sold 16,500 one ounce American Platinum Eagle coins. None have been minted to date in 2015.

Sales of American Platinum Eagle Coins 1997-2014

American Platinum Eagle coins sold well their first three years of mintage.

Platinum Canadian Maple Leaf Coins

The Royal Canadian Mint also sells a platinum coin series- the Platinum Canadian Maple Leaf coin. In 2014, the Canadian Mint sold 19,500 ounces of these platinum coins.

Royal Canadian Mint Platinum Sales 2009-2013

The Canadian Mint has sold under 100,000 ounces of platinum from 2009-2013.

Perth Mint Platinum Sales

The Perth Mint sells platinum coins in small amounts.

*Through March 18, 2015. Sales of platinum at the Perth Mint are relatively strong in 2015 as the Gold Platinum Ratio has been greater than 1:1 all year making platinum inexpensive in comparison to gold.

Platinum Supply

Platinum Mining

Platinum mining represented approximately 83% of the annual global platinum supply of about 6,000,000 ounces in 2013. The remaining supply (or about 1,300 ounces) came from secondary sources.

Approximately 75% of global platinum mining supply came from South Africa in 2013. Global platinum mining production was projected by the CPM Group to be 5,330,000 ounces in 2014 with South Africa's percentage of total mining droping to 68% due to a mining strike that lasted from January to June of 2014.

According to World Mine Cost Data and CPM group, it costs platinum miners about $900 per ounce to extract platinum. As of March 16, 2015, the price of platinum was $1,104 per ounce.

An entire year's global platinum mining supply is worth about $6.6 billion (six million ounces X $1,100 per ounce) or less than half the value of the annual global silver mining production.

Countries Producing Platinum

Nearly all the world's platinum comes from South Africa and Russia.

South Africa produces the bulk of the world's platinum supply.

Virtually all of U.S. platinum mining production (about 2% of the world's total) comes from the Stillwater Mining Company in Montana that operates two mines in that state.

China and Platinum

China is the world's largest consumer of platinum for jewelry. In recent years, China has increased its platinum mining production to about 70,000 ounces in 2014 from about 20,000 ounces in 2000. Volume of platinum deliveries on the Shanghai Gold Exchange have also increased in recent years:

Platinum trading volume has increased nearly three fold on the Shanghai Gold Exchange since 2005.

Secondary Platinum Supply

In 2013, over 83% of secondary platinum supply came from recaptured platinum from auto catalytic converters, up from abut 32% in 1995, reflecting the increased use of platinum in car manufacturing. The remaining secondary platinum supply in 2013 came from jewlery (about 4%) and platinum recaptured from end of life electronics (about 12%).

Existing Platinum Stock Piles Provide the Metal To Cover the Supply/Demand Deficit

According to the CPM Group, the supply/demand platinum deficit in 2014 was made up by "stale bull" investors who liquidated their positions and by commercial stock piles that added to the platinum supply. Once these souces are gone, demand will need to be met from mining and secondary supply sources.

How Rare is Platinum?

Global platinum production was just under six million ounces in 2013 and about 5.3 million ounces in 2014.

Platinum mining production is but a sliver (.7%) of the total global precious metals mining production.

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Golden Eagle Coins

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Credits:

Platinum market data - CPM Group

2013 Silver, Gold and Platinum mining production sources: The Silver Institute, World Gold Council and CPM Group, respectively.

United States and Canadian Mint sales figures from the United States and Royal Canadian Mint, respectively.

All charts produced for Smaulgld, courtesy of Nick Laird of Sharelynx – The Gold Standard in Precious Metals Charts, other than the Canadian Mint and Platinum Mining charts which are my own inartful creations.