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 [Music] I'm Charlotte McLoud with investing.com and here today with me is Edward sterk director of research at the world Platinum investment Council thank you so much for being here great to have you oh well thank you for having me on again charlot it's it's a real privilege to to to be on once more and chatting to you again today yes yes really good to have you here as well and as I said before my apologies for my my setup is not as ideal it usually is because I'm at pdac so we hopefully we'll make do and and

we'll see how it goes I'm optimistic it's going to turn out well but yeah really excited to get into the wpic latest quarterly report this is a a pretty exciting one because we can look back at all the numbers from 2024 and of course forward to the 2025 numbers so if we start with 2024 I believe there was a deficit of almost a million ounces I wondered if we could get into that and and talk about just briefly the Dynamics that led us there thank you yes so I mean you know wi many analysis as you say in terms of

the um the estimate for the full year deficit for 2024 um that's quite a substantial increase when we spoke last November um the number's gone up by more than 300,000 ounces and that's largely related to investment flows that came through in the fourth quarter so we saw two different areas where investment flows deviated quite significantly from our previous estimates ETFs it's a quite substantial ETF world in the fourth quarter and then also in exchange stock movements and those exchange stock

movements are really um you know the the what's Driven those is kind of everything we're talking about today everyone's talking about today you know it's it's actually about us tariffs so back in December when um the incoming Trump Administration started talking about the threat of tariffs we began to see that impact on the commodity markets in terms of distorting um the flow of metals versus what would happen um Lally and in effect um in terms of exchange stocks what what that resulted in in in

in causing is a flow of metal from Europe in particular into the US and part of that was driven by um Market participants that are active on on the NX Futures Market who backing some of their positions possibly with physical metal stored in Europe they needed to get that into the states because they've suddenly began to worry that they might have to pay tax when they brought that material in in the future and that would obviously um impinge upon their profitability so there's been this really substantial uh flow of metal from

Europe in particular as I said into the US and some of that metal is being lodged on um you know in NX approved uh warehouses and that boosted our 2024 um investment demand figure as a result resulted in that expanded deficit almost a million ounces and that's really a trend that we're seeing continue into 2025 yeah I think that's that's exactly what I was going to ask you there's been so many conversations around tariffs and of course what a perfect day to be talking to you about it because we just

had the tariffs going to effect on Canada and Mexico additional tariffs on China we've seen some retaliation there maybe is there is there anything you can say at this point about about how you see that continuing that impact so in terms of the PGM markets um you know the the actual sort of flow of of metal itself from Canada or Mexico is pretty dominous um but where the impact could be felt is in terms of the you the highly integrated nature of the North American automotive industry so if you

look at um uh you know some numbers on that uh Mexico supplies um quite a substantial number of vehicles to the US um there are fewer vehicles that are made in Canada exported to the US I do have the numbers but I'll have to just tell check them quickly so me a second but um yeah it's uh in terms of Mexico you it's about 15% of the US vehicles vehicles are made in Mexico um something like 7 and a half% of vehicles are made in in Canada in terms of the auto parts it's much more substantial so almost 45%

of auto parts that are used in the US Auto industry made in Mexico for for for Canada it's over 10% so you can see that they're highly integrated Industries obviously the you know the tariffs being brought in is really a tax on the US consumer so it's increasing the cost to the US consumers to buy the vehicles that contain um Mexican or Canadian made Auto Parts to buy vehicles that are made in those countries and so the risk really for PGM perspective is an erosion of demand due to the higher cost of

those vehicles and so in terms of platinum the downside risk of platinum Demand on our numbers in a worst case scenario is about 97,000 ounces the bladium is more substantial um something in the order of um 350,000 ounces and um I guess focusing on Platinum because we're talking about our Platinum courtly today you know that 9 97,000 ounce downgrade to potential to platinum um is you know it's it is not insignificant but in the scope of our deficit forecast of 2025 which is 848 th000 ounces it

wouldn't really change that so there is a potential for you know a negative dowr demand back of this from an automotive perspective it doesn't change the it doesn't change the underlying deficit which is structural and embedded the the other thing to bear in mind of course is that there are some potential upsets as a result of this you know sadly it looks like the us is going to be rolling back on its environmental commitments that's are separate tariffs obviously that could be positive in terms of um

petroleum demand for pgms it could be positive in terms of internal combustion engine demand for pgms and our estimates suggest that the those potential positives would outweigh the negatives in terms of for example lower hydrogen demand for platinum okay okay really good to go into that especially during this time when everything is so in flux so we'll be keeping an eye on that and you started to talk about the 2025 deficit that's projected so whatever is going on with the tariffs not likely to

change that in a major way I believe it's going to be the third consecutive year of deficit and it is is projected smaller than the 2024 one but still quite sizable and you often talk to us about how we're seeing Trends in the partum Market continue and of course we've got this additional tariff situation going on right now but aside from that is it is it overall continuing trends that will create that deficit yeah I think most of the trends are the same really you know we are seeing this continued um uh I suppose

slower growth for battery electric vehicle uh Market penetration rates that's a theme that's continuing um you actually in some regards some of the activities that are going on in the US kind of um have a bearing on that as well certainly in terms of um there is there is a bit of a consumer reported in the Press there is a bit of a consumer backlash against um against Tesla as a result other electric vehicles are available of course so um you know consumers may still be buying electric electric vehicles from uh from

from European automakers K or you know from China um but that trend is for slower growth it is still continuing but slower growth in terms of B Electric Vehicle market share and that obviously then is potentially positive for um for internal combustion engine demand for pgms uh you know either hybrid vehicles or or or or Pure Ice the other theme that's really continuing is kind of going back to that topical discussion from Q4 last year of tariffs is that we're continuing to see that that effect

flow through in terms of investment demand um so those exchange stock movements have continued in fact they've actually accelerated in the first quarter of this year in our numbers in that $848,000 ounce deficit projected for 2025 included within that are 150,000 ounces of exchange stock inflows into Nyx now year to date we're at over 275,000 ounces so you can see that even to get to our number uh for for for 2025 you'd have to have quite a significant unwinding of those NX exchange stock

flows just to get back to where our full your estimat is so if we were to draw a close to the year today uh the deficit would be more substantial than our current projection okay okay and so I think we'll go a little bit deeper into some of these supply and demand number projections and so in terms of button and demand it's set to come down a little bit on 2024 but there's there's definitely some highlights investment demand it looks like it was up 77% in 2024 which is is pretty impressive what

is it set to look like in in 2025 well we've got it coming down 14% year on year but that um just brings it back to still very elevated levels um Bor and coin demand is not quite as robust as we've seen um in previous years there certain geographies where there is a fair gr of weakness that's expected um the North American Market being being one area but where we are seeing um demand strength from an investment perspective is in ETFs uh and it is those exchange stock photes so um you

know overall I think we've got 66,000 oun projected untils a table demand for 2025 that's actually a pretty a pretty respectable level um that's historically elevated um and interestingly when you look at um just the investment Market in general you could look at ETF flows you could look at uh NYX Futures volumes or or or options volumes we're seeing significant increase in in in those trade flows so increase in in ETF uh volumes uh that's kind of going a little bit both ways so there is a lot of

selling as well as a lot of buying there's more buying on average than selling at the moment NX volumes have doubled over the last four years in terms of the Futures Market NX option volumes have actually in January they increase 500% year on year and what's quite interesting about this is we've seen the price of platinum which has been locked in this sideways trading range for the past um or getting off for four years now between roughly 900 $1,100 per oun what we're seeing is that

that trading range is actually narrowing even as the volumes are going up and so you know that's something that is quite interesting there there's there's increasing competition within the market uh for for sort of price Direction and at some point the price would um you know has to break out of that narrowing range obviously with the deficits that we project in terms of platinum markets we would anticipate uh that that price response to be positive um but of course you need com rule out uh when when

prices break out it can go in both directions um so we'll we have to wait can see but it's certainly very interesting um and um there's a limited amount of time left before something really needs to change yeah yeah I think certainly it does feel like it's it's got to change at some point and on the demand side I also wanted to bring up jewelry demand and I know we've talked about this in the past it looks like it's another kind of bright spot in in 2025 in terms of demand I imagine this

is related perhaps to the very high gold price which might be directing more people toward platinum jewelry any anything you would say on that note yeah so you know if we were talking um say this time two years ago I would have probably said that flaps the new up for jewelry um and so actually being able to point to jewelry and say we've got you we have year on-year growth in 2024 projected growth again in 2025 takes us back through uh two million ounces a year the all Market is about 8 million ounces so gives you some scope

for the SC the scale of the jewelry market um this is actually quite constructive it's quite positive the gold price is probably part of that um so you know if you look at um price of gold it's a significant premium to platinum at the moment that's um historically actually quite an unusual situation it's normally the reverse but Translating that high gold price into consumer demand for jewelry some consumers are being priced out of gold and they're looking for Alternatives and

platinum is an option there at the retail level even though the gold price has been so high platinum jewelry typically still has traded out a premium to Gold because of sort of embedded uh sort of perception that value that Platinum is a premium product but interestingly we are beginning to see at the consumer level now that the price of gold has become so high things like white gold for example which is only you know roughly 75% pure depending upon the alloy um is now beginning to be price to the premium to platinum and if you're a

consumer and you're given the choice between platinum or white gold and platinum is almost 100% pure you're probably going to go to platinum certainly in in European and North American markets so I think we'll see um Platinum benefit potentially from either capturing some of that wide gold market a lot of that's the bridal Market because that tends to be any stone setting you a lot of consumers particularly in the west tend to go for a wi metal rather than than for gold because Stones look better um and so

that's upside potential and that's probably beyond what we've got beak into our numbers at the moment um but equally for the uh for the Jewelers for the Fabricators and for the for the jewelry retailers the price of gold going up to where has done has um interest ratees potentially Staying High long has resulted in a significant increase in their working capital requirements and so just shifting some of their inventory some of their fabrication from gold into other metals including Platinum actually

could be quite helpful for them to release some of that working capital and um you know that may be a drive of force behind this as well and so people will be displaying more platinum jewelry and for a consum walking into a shop just seeing more of that on display means that you psychologically they may be more likely to a platinum jewelry piece than they would have been in uh you know in the past yeah yeah really interesting points there I always love to hear about the jewelary angle and looking at the other

parts of demand we've got Auto and Industrial demand that are looking to be on the weaker side in 2025 so any any important points that you would pull out there I mean Auto demand I think we've got down 1% year on year so it's still actually pretty elevated and in the context of um you know the fact that we although we we you know we think Bach electric vehicle Market penetration rates are slowing it is still a kind of growth part of the market is it is still capturing market share from intell

engine Vehicles so actually only 1% of Cent for auto demand is relatively good and and baked into that is a 22% year- on-year increase in battery electric vehicles and yeah that's an area where I think uh there could be some scope for for for change effectively you know we could see it's quite a big increase year on year it may not manifest um to that extent and internal combustion engine Vehicles probably mostly hybrid and therefore pgl demand would benefit on the back of that and in terms of the other areas uh

industrial demand is an area that's down projected to be down 14% near on it um that's quite a big decrease but it's it's important to stress that industrial delarm has on average increased by three and a half% kago since 2014 uh it's just that it's quite cyclical in nature and next year we're just or this year rather we're expecting few glass um new glass manufacturing uh facilities to be uh to be commissioned and it's when you commission those facilities that's when you see the the

Platinum demand come through so if you just cyclically after the last five years we've seen significant expansions of glass manufacturing capabilities globally mostly in China um this year we just we're just we're just expecting to see fewer of those and that that brings down that that industrial demand but there are other areas of industrial demand where we see you know quite significant Ur year strength so hydrogen um for stationary and other applications actually still continuing to deliver

Double D to your growth um and that's despite the US possibly you downgrading its hydrogen PLS Trump's obviously anti the inflation reduction act um but really the US from from our estimates the US has not been the main driver of future demand gr uh for for platinum from the hydrogen industry it's really sort of a Europe China their rest of the world story okay okay I think we've gotten a pretty good look at PL and demand in that case so let's look over to supply as well so I believe it's set to come in

at the the second lowest number in 2025 since 2013 if I'm getting that correctly and it's because of lower mind Supply as well as lower recycling Supply so we want to look at both of those things I thought we could start with the the M Supply angle and and look at what is behind that how are the miners doing I usually ask you in terms of their their health and activities yeah so it's um you know I me I think the the kind of overall trend in mining is for um a consistent contraction in in Supply uh the reality

is that there isn't a platinum mine in the world you know these are all these mines all produce and therefore their economics depend upon multiple different metals they all produce all six of the pgms plus gold uh and then base Metals as well nickel copper uh and chrome and and you know for for for for for mind Supply the the decline in the prices of padium and rodium in particular over the last few years and more recently um there's been a bit of a pullback in the Chrome price as well you know that's

weighed on the economics for these these producers and so they've worked to to to restructure their operations in order to focus not on uh output but on profitability and that um is something where they've generally been quite successful in in in achieving that so you know some of the pressure on them has has uh has reduced But ultimately um that's resulted in in reducing their output effectively and that multi-year trend has kind of continued and we expect it to continue 2025 on a year on

year Bas year basis you know the the percentage decline is a little bit um kind of MK what what what actually happened because 24 was boosted a bit by a release of work in progress indry so if you if you recall with um you a couple of years ago South Africa had those ongoing um Power shortages and the the the mining companies um in order to manage that uh that that shortage of electricity they were effectively flexing their smelters and that continuing to M continuing to run their concentrators but not necessarily

smelting all of the concentrate that came out of the plants and as a result they built up a bit of a um excess inventory working progest material some of that was released last year and boosted the full year number okay also really interesting to go into that and I don't want to forget recycling that angle as well this is another one that we usually talk about so can you talk about what is at at the root of that weakness in recycling supply for platinum recycling is really interesting so if you compare our estimates to the

ones we put forward in November that's the biggest area of change for 2025 so recycling has been reduced by 278,000 ounces versus our our last update it's quite a big change probably is worth um unpacking that a bit the the reality is that you know I think the safe based case assumption is that we see recycling rates which are extremely depressed 2024 was the lowest year for recycling all time series um is that we see those recycling rates recover um why were they depressed we don't know for certain um

but it's generally a shortage of end of life vehicles uh coming through the scrappage system part of that's related to covid uh impacting supply chain and then the semiconductor shortage um reducing new vehicle production in the past and consumers being forced to run new vehicles for longer but yeah that that that that supply of new vehicles is kind of Riz now but we're still not seeing the scrap materials come scrap Vehicles come through it's difficult to really know exactly why that is the case

all we can say is that you know our base case assumption is for the recovery to come through and on a year onye basis when we don't see it materialized we downgrade those expectations and that's just what's happened this time why why are the scrap Vehicles not coming through well I can only theorize we don't know exactly for certain but um it's possible that consumers are still continuing to run all vehicles for longer interest rates are relatively high that impacts the affordability of

new vehicles it's possible they're buying EVS but not scrapping their old uh gasoline or diesel vehicle they're keeping it as a as a backup because they have Ranger anxiety or charging infrastructure concerns it's possible uh that they are actually considered an end of life in the West but are being exported to emerging markets and you those the sort of things where we we're theorizing because we it's quite hard to get data on it um for for all geographies we can see in Japan there

has been an increase in used vehicle exports from that market but that data is not as easily available from uh Europe or or or North America for example um but you know these are things that might be happening and so therefore those vehicles are not being scrapped uh and and effectively the pgms are not being recovered from and coming through as as that as that recycling SP would have been anticipated um previously yeah that is that is a really interesting part of the market and thank you for trying to at least theorize on what

might be happening there I appreciate that it's hard to know so I think I think we've taken a pretty good look through what's in the report but before I let you go any other points that you would add or want to touch on know we talked a little bit about price and and price of course is always the one that people are so concerned with but yes any final thoughts from you yeah I think you know just probably to emphasize that uh we we live in interesting times there's a lot of uncertainty out there but the scale of

the deficits over the last three two years and for this year are so significant that you you know it's very difficult to envisage excuse me a scenario where they'd be reduced to zero and to give you some context to the scale of the deficit for this year uh and this is slightly hyperbolic I mean this wouldn't happen but effectively to eliminate that deficit you'd have to reduce glob Automotive production by by 30% that's not going to happen so the deficits are are structural they're embedded we're

seeing this the deficits are the market shortfall is being Satisfied by the depletion of above ground stocks and that process is happening faster than we were expecting it to happen as of November last year um and at some point their stocks will fall to a level where we would expect to begin to see the underlied fundamentals being reflected reflected in the Flatland price and as mentioned you know that site where trading range is nwing we think we're towards kind of crunch Point um but markets can prove you wrong for a long

period of time before before before things really manifest so we'll have to wait and see and kind of keep on watching the space yeah I think this is certainly one where where a little bit of patience is still required for now so we'll we'll keep catching up with you when the next reports come out and and we'll see how it goes but thank you so much for for coming on to talk and going through the report once again well Charlie thanks for having me again it's much appreciated I'm Charlotte McLoud

with investing news.com and this is Ed sterk with the world Platinum investment Council thank you for watching if you like this video make sure you hit the like button and subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below [Music]