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WPIC said it is expecting total supply to fall in 2024 by 1% to 7.11 million ounces

The forecast deficit for the platinum market has widened for 2024, as weak supply is outweighed by sustained demand from the automotive and industrial sectors.

The precious metal is now forecast for a market deficit of 476,000 ounces in 2024—from prior expectations given in March of 418,000 ounces—amid strained supply from the mining sector and resilient demand, according to a new report from the World Platinum Investment Council.

“The upfront takeaway is that this is the second year of a material market deficit in a row,” Edward Sterck, director of research at WPIC, said in a call.

Overall, WPIC said it is expecting total supply to fall in 2024 by 1% to 7.11 million ounces. This slip is largely expected to be driven by lower mine supply, weighed down by restructuring plans, closures and slower-than-expected production ramp-ups in South Africa, and Russian sanctions and planned smelter maintenance.

Meanwhile, demand is forecast to slip by 5% in 2024 to 7.59 million ounces, though this remains above the five-year average. Growth in automotive and jewelry markets is likely to be offset by weaker investment and particularly industrial demand, according to the WPIC.

“We see further risks to supply, but more importantly, we see demand staying sustained, with some upside from the automotive industry accelerating the withdrawal of above ground stocks of platinum,” Sterck said.

Mine supply is expected to be 3% lower on year, underpinned by lower output from South Africa and Russia, with refined production expected at 5.47 million ounces for 2024. Recycling rates are projected to improve 5% to 1.64 million ounces as spent autocatalyst supplies begin to recover and Chinese jewelry demand improves, though this remains significantly lower than historical norms.

The drop in recycling rates in 2023 reflects a shortage of both scrap jewelry and end-of-life vehicles, as cash-squeezed consumers drive vehicles for longer, as well as stricter regulations in North America and China. The metal is used in the catalytic converters fitted to combustion-engine vehicles, to remove some pollutants from exhaust fumes.

“I think we have hit the trough, in terms of recycling rates. The question is, how long it will take to properly recover,” Sterck said.

On the flip side, automotive platinum demand rose to 832,000 ounces in the first quarter of 2024, the highest figure since 2017, benefiting from rising vehicle production and an increased share of the hybrid-vehicle market. For the full year, the automotive industry demand for platinum is projected to grow 2% to 3.27 million ounces.

“We will see a transition to electric vehicles, but the question is when. We’ve had the early adopters, but the pace is slowing as the next group of consumers need cheaper battery vehicles,” Sterck said. “But many people are willing to accept partial electrification, like hybrid cars, keeping platinum demand high,” he added.

Industrial demand hit a record in 2023, rising 12% on year to 2.63 million ounces. While this is expected to pull back to 2.24 million ounces in 2024, the forecast figure is still 17% above the prepandemic average.

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PBoC and finance ministry firms up plans for long-dated bonds to support investment

Chinese authorities have kicked off plans to sell Rmb1tn ($140bn) of long-dated bonds, as Beijing raises spending to stimulate the economy.

The People’s Bank of China has asked brokers for advice on pricing the sale of the first batch of the sovereign bonds, according to two people who received requests.

China’s government announced plans for the bond sale during the annual session of the country’s legislature in March, saying it would support investment in critical areas and reinforce economic momentum in the second quarter amid a lengthy property crisis.

“The bond sale is a critical part of the concerted efforts to support significant, urgent and challenging projects that are essential for the modernisation of the economy,” Liu Sushe, deputy head of the National Development and Reform Commission, said in a public briefing in mid-April.

“These are all projects that have long been intended but not materialised, and requiring a central level drive.”

The sale comes after China’s regional banks piled into long-dated sovereign bonds in the first quarter of this year — driving the cost of government borrowing to record lows — as they sought a haven from volatility in China’s equity and property markets.

China sold similar long-dated bonds in 2020 when Rmb1tn was raised to try to control the Covid-19 pandemic and boost infrastructure investments. The bonds being sold this time are expected to have even longer maturities, as a way of funding long-term projects while alleviating the debt burden of local governments.

The new bonds differ from normal government bonds in that the money raised is for targeted purposes. This is the fourth round of special sovereign bond issuance, after a sale in 1998 to recapitalise state banks and 2007 to set up its sovereign wealth fund.

The sales are expected to improve liquidity in the market for longer-dated Chinese bonds, which investors have historically tended to hold to maturity.

China is trying to move the economy away from a growth model fuelled by investment in property and infrastructure, which has caused the debts held by local governments to balloon.

The bond sale “comes at a crucial time for China to reshape its debt structure”, said Jameson Zuo, a Hong Kong-based director at CSPI Credit Rating Co, referring to Beijing’s strategy of using more central government borrowing while trying to tackle the mountain of local government debt.

“Compared to a global standard, China still has significant room, potentially trillions of yuan worth of bond issuance over the next five to 10 years, to let the central government take up more leverage and boost investments,” Zuo added.

More long-dated bonds are expected to be issued in subsequent years to strengthen important areas such as food security, energy and the manufacturing supply chain, premier Li Qiang said this year.

The first batch of the new bonds to be issued will be for an amount between Rmb80bn and Rmb100bn, according to two people who received requests from the central bank. Most will have 30-year maturities but there will also be some 50-year bonds, they said.

The finance ministry summoned officials from the country’s top commercial banks to a meeting on Monday to arrange the underwriting of the long-dated bonds, according to an internal notice sent to some banks seen by the Financial Times.

On Monday the ministry of finance said the first bonds would be issued on Friday.

Sale plans have been submitted for review to the state council, China’s cabinet, while the finance ministry and National Development and Reform Commission are also involved in co-ordinating the sale.

The PBoC hinted in April that it would also consider buying these bonds on the secondary market when the time is appropriate, which “will give it better control of interbank rates”, Zhi Xiaojia, head of Asia research at Crédit Agricole, said.

Zhi said investors “should have already fully prepared for the pick-up of government bond supply from late Q2 [second quarter]”, after China’s politburo, its top 24-member decision-making body, said in late April that such a sale should start “as soon as possible” to fund stimulus and boost demand.

The PBoC has repeatedly warned this year of the dangers of crowded trades in long-dated bonds, which could leave smaller banks that piled in to bonds this year more vulnerable to interest rate fluctuations, potentially leading to a Silicon Valley Bank-style meltdown.

China’s 30-year bond yield, which moves inversely to prices, has steadied at about 2.5-2.6 per cent, its lowest level in decades, after a sharp drop from more than 3 per cent last year.

The upcoming issuance of bonds will help meet demand and is likely to support the central bank’s aim of raising long-dated yields moderately, said Ming Ming, chief economist at Citic Securities.

However, CSPI’s Zuo said that yields might remain “steady” even after the bond sale, as a shortage of other investable assets would prompt investors to keep buying sovereign bonds.

The central bank, the ministry of finance and the NDRC did not immediately respond to requests for comment.