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 I'm Charlotte Mloud with investingnews.com and here today with me is Edward Stark, director of research at the World Platinum Investment Council. Thank you so much for being here. Great to have you as always. Thank you, Charlotte. This guys be really good to be catching up with you. And of course, what we're going to go into today is the WPIC's latest platinum quarterly, which is just coming out. So, one of the the notable things that stood out to me when I was looking over it is that the deficit forecast for 2024 has

been revised upward to 476,000 ounces, I believe. So, I thought we could start and just look from a high level. Of course we'll go into all the supply demand nuances but from a high level what led to making that change. So there's a there's a couple of things. Firstly on the supply side um you know there there are additional challenges that are facing the industry both in South Africa also in Russia and and and actually more broadly um in terms of byproduct production from from nickel

operations. So a little bit of a downward adjustment to that about 20,000 ounces. Um and then otherwise uh just sort of general upward revisions to investment versus previous expectations and um and also some slightly uh higher higher numbers in terms of broader demand. So it's a lot of small changes. We've only gone from 418,000 ounces I think was our previous figure to as you said 476, but it's little bits and pieces here and there. Okay. And I'm going to move over to supply. I think usually I put supply

toward the end, but I'm going to put it first this time and and see how that's looking. So, what stood out to me there was supply came in second lowest in the time series that you look at. So, I'm wondering if you can add context on how wine and recycling supply played into that. So, from for mine supply, we've just seen a gradual erosion of output over the last few years. So, this is a bit of an ongoing theme. In terms of total mine supply, it's down 3% year on year. was expected to be down 3% yearon year for

this year. The factors that are playing into that are ongoing um sort of operational challenges in South Africa to a degree where the the the the the recent and rather dramatic fall in the prices of palladium and roodium which produced as byproducts of platinum have just um eroded the um the economics of of operations at the top end of the cost cut. Now we haven't seen any dramatic changes yet in terms of uh you closures and things like that but we are seeing a number of restructuring announcements uh

which include try which effectively are trying to to reduce costs. Um included within that are some unfortunate job losses and and the outcome of that is is just really reduced operational flexibility. So where in the past for example if a mining company had um you know mined in an area and uh happens to to to encounter a geological interruption they might have been able to take that work crew and move them elsewhere going forwards you know the flexibility to be able to do that is probably reduced um also you've got in

Russia the impact of ongoing sanctions against noric well not against nickel but against Russia as a whole um and um you know the impact of that is for nickel they've got reduced access to western mining equipment. They've pivoted to China to get replacements for that equipment, but overall they're just their guidance is just that they're they're kind of struggling to sustain output. They've also got a big smelter rebuild that's planned for this year, but it's reducing um their their

guidance. Um and I guess also, you know, to a degree there's some question marks as to how easy that smelter will rebuild will be without access to to Western engineers and so on. Okay, good to go into that. And you know when you talk about second lowest in the time series I'm wondering if we can look back a little bit historically at that. So thinking about what is the time period that you're covering there and when was that lowest or supply? So uh our time series goes back to 2013.

So a little over uh 10 years. You're now challenging me on the numbers. I have to double check this. I don't Yeah. Uh so um the lowest was COVID um is the answer. So anyway, for understandable reasons um output in in CO was uh was significantly reduced. Okay. Okay. Should have thought of that myself, but thank you for for looking up that number. Okay. So I think that that covers supply to to a degree at least. And let's move over now and take a look at demand. So on the demand side,

automotive demand reached a 7-year high in the first quarter. And I believe that's partially at least because of EVs losing some ground. So I wonder if you can talk about that and the extent to which platinum could benefit moving forward. Yeah. So we're seeing um a lot of consumer reluctance to uh to to to make the switch from internal combustion engine vehicles to full battery electrification. Um so to put some numbers around that uh in terms of market share in China uh which is the biggest market for battery electric

vehicles things seem to be stalling at around 20 to 25% market share depending upon the quarter. Um in um in Europe it's sort of in in the high teens close to 20% and then in North America it's sort of uh in in single digits sort of 7 to 10% market share. So that just reflects an ongoing consumer reluctance um to make the switch. I think the the the the rationale behind that for consumers is you don't have the subsidies or the tax incentives that were available to the first or early

adopters to make to make the switch to battery electric vehicles. Um and then there's range anxiety, there's infrastructure anxiety in terms of the ability to recharge your vehicle. And so people are kind of trying to stick with what they know uh which is mainly internal combustion engine um vehicles. Now that said, they are prepared to make partial a switch to partial electrification. So, we're seeing the fastest growing segments now are hybrid vehicles. Now, those can be plug-in hybrids. Um, or in China, the fastest

growing segment is what are called extended range electric vehicles. So, these are battery electric vehicles that contain an internal combustion engine as a generator. Unlike in plug-in hybrids, they don't um actually drive the wheels. All they do is charge the batteries. They're highly tuned um for a particular task. They run at a constant RPM, but you still need to treat the exhaust from those engines. So that so you need platinum that goes into those. So I think the um the kind of impact here

really is that uh what we're seeing is potentially a higher for longer environment for um for for for platinum for automotive end users. And that's something that um is right now a bit of a focus for investors. So we're getting incoming interest from investors who've sort of had the received wisdom that everyone's going to be driving Teslas by 2030 and now they're looking at us going well maybe won't be. And so these these uh sort of commodities that perhaps lagged a little bit might be worth

reooking at. Okay. Very interesting. And we've we've talked in past conversations about recycling supply and that has been lower because of fewer vehicles in the pipeline. So as this happens, could a follow- on effect then be that we have more recycling moving forward? So we've got a um we've got a 5% recovery in recycling in our numbers this year. Um but to put some context around that uh 2023 was an exceptionally low year for recycling. So it was around 600,000 ounces below the sort of long

run average which is uh given it's only at one and a half million ounces. Quite a big quite a big number. That 5% recovery therefore is actually a fairly small number. Now that said overall uh the the challenges that are facing recycling are a shortage of end of life vehicles which you touched on but also um some regulatory headwinds in China and and in the US. Now all of those things are probably solvable in time. So our base case assumption is that we will see recycling recovered to those

historical levels. Um but the timing of that recovery is hard to call. It could be slower or it could be you know faster than than than our base case um estimates. I think we beyond the scope of our our our quarterly in our longerterm research we we we expect to get back to roughly around two two two.1 million ounces by 2027. But if it's slowed down at all that changes the dynamic quite a lot. It means for platinum deeper market deficits. And if you're looking at palladium uh then you know potentially the tipping point into

surplus is more like 2026 2027 rather than um sooner than that. Okay. Okay. of course many factors going on there. And if we shift over now to industrial demand, so from my understanding, 2023 we had record levels and 2024 it's looking like we'll remain strong but not at those very high record levels. But one of the one of the interesting things that I noticed in this report is within that industrial category, you've added a line for hydrogen. So we've talked before about the importance of hydrogen to the

platinum story. So I'm curious still why why was now the time to break it out in that way? The time to break it out because we're getting towards meaningful levels. Now I should stress that what we've broken out is only uh stationary applications. So that's electrolyers and stationary fuel cells and some of other downstream uses of platinum within the hydrogen hydrogen industry. So fuel cell electric vehicles still sit within our total automotive demand bracket and are not split up. So

real hydrogen or total hydrogen demand for platinum is actually higher than the the number that we that we've broken out today. That number for 2024 is 75,000 ounces. That's up um 118% I think it is from uh 128% from from last year. So it's growing off a small number but very rapidly. Uh and I think that's the point. You know it's only around 1% of demand for um for this year but it is growing quickly. So, it's now the time to be able to kind of give everyone the numbers and um and see how that evolves

over the next couple of years. Okay. Okay. Makes sense. And thanks for the the clarification there on how that's actually working. So, jewelry demand, it looks like it was up 5% in Q1, but with 53% growth in India. So, to me that sounded quite large and I wondered if you could go into what you're seeing there. Yeah, I mean you flatter as the new up has been my mantra for jewelry for quite some time. So this is the first time I can actually talk about it with some you know more positivity. Um but yes, we're

seeing kind of a broad-based recovery in jewelry even in China which used to be the biggest end market for jewelry but has been steadily declining for years. This year we're expecting a uh a modest recovery but as you pointed out India is really the standout geography in terms of uh increasing demand. up 53% in the quarter. Our forecast for the year is a a 28% year-on-year increase. Um so what's driving that? Well, for the most part, it's actually a very successful um uh promotional campaign run by our

sister organization, the Platinum Guild International. So their mandate is promoting platinum jewelry. A lot of the jewelry in India is um is is for men rather platinum jewelry that is for is for men rather than for women. and uh the the Platinum Guild International have sponsored some Indian cricketers. Cricket is quite popular in India and so that's helping support demand. But it's not just a domestic market they're addressing. They're also fabricating in India for export to the Middle East and

actually also for the US as well. So, you know, I think it's just a um it's too early to say that this is going to be an ongoing trend probably for India, but certainly it's encouraging and it is a market that as we know is huge for gold and potentially just taking a small bit of that market could be quite a big thing for platinum. Okay. Well, I'll I'll hold off on getting too excited just yet about that. So, if we look now at investment demand, I'm wondering if you can break down

what's going on between foreign coin and ETF demand because it looks like there's some quite interesting dynamics going on there. Yes. So, the numbers that we've factored into this quarterly update are fairly modest for investment demand. So, D quite substantially yearon year. Um, in bar and coin demand, that's a product of um our our expectation that we won't see a platinum eagle being produced in the US. Uh, that may change. That's just common the base case assumption at the

moment. Um so so relatively weak demand as a result in the US. We do expect part of that to be offset by increased sales of Canadian maples uh and uh and Britamians from the UK. Uh but not to completely fill the gap. Uh there's also expected to be weaker demand in in Japan and that's a product of in yen terms actually really high platinum prices. So some sellbacks there that offset um purchases. Positively we're actually seeing really strong demand in China. So uh a bit like hydrogen we've split out

uh Chinese bar and coin investment demand this year. Uh last year we have identified 52,000 ounces of bar and coin demand. This year the number is 60,000 ounces and these are only for for bars and coins that are less than um half a kilo or 500 gram in size. There are additional sales that are identified in in larger sizes that don't make it into our data set. So borrow coin demand has the potential as as things evolve to to potentially grow higher if that if those larger bar sizes in China um you know

identified as as as investment demand and do come into our data set going forwards. The other thing is ETF flows. So the base case assumption at the moment is because of the higherable interest rate environment non-yielding assets are less attractive and that includes any commodity gold, silver, platinum, copper, what have you. you know, these are non-yielding assets and so um in the hunt for yield, they tend to be less favored than alternative options. As a result, in our base case numbers, we've got ETF outflows of

120,000 ounces. That said, just in the last couple of weeks, we've seen inflows into the ETFs of almost 280,000 ounces. Um and so between now when we talk in September, our investment numbers have the potential to change quite a bit. There's definitely quite a lot of investor interest in platinum at the moment. Okay. Okay. Very interesting. So, we'll keep an eye on how the that looks for the next time. So, reading through the report, one of the there was a really good takeaway or quote. I'm not going to

read the whole thing, but I'll I'll give the gist as I understood it. And essentially, it sounds like fundamentals for platinum are really quite good right now. They're they're the best they've been in some time, but the sentiment among investors is just not there. So, I'm wondering if you can expand on on that a little bit. Yeah. So I think there's two things and I and you know I touched on one of them earlier which is the kind of received wisdom about um battery electrification

and um that the the flow through impact on on automotive demand but the other thing has kind of been uh historically platinum and gold have have sort of traded to a degree in step. Gold's obviously recently been at all-time highs. It's come off a little bit but platinum hasn't participated in that um significant rattle. So some of the question marks are well if nothing of us hasn't participated then surely there's something wrong with it. I think what we'd say is that if you if you unpack

the investment flows and just look at what's happened with ETFs and other forms of investment actually platinum and gold have tracked each other really really closely in terms of um the trend of volumes. So the distinction has been central bank buy where platinum doesn't doesn't fit into um you know the the sort of asset allocation process for central banks. Gold has benefited quite significantly um from central bank purchases and that's been one of the things that's elevated gold's price. So

gold's the outlier here, not platinum. In terms of the underlying fundamentals for platinum, I mean clearly they're extremely strong. We've got two consecutive significant deficits. Um highly constrained supply that's likely to continue for the future. Got pretty robust demand that's also likely to continue for the future and it's actually quite price inelastic. So going forwards what's happening is we're seeing a rapid depletion of above ground stocks. By the end of the uh well the

second half of this at some point in the second half of this year we get to below six months of above ground stocks in terms of demand. And in sort of classic commodity economics 101 at at around the six month mark in terms of above ground stocks that's when you begin to see above uh sort of tightness comes come into the market and begin to reflect in price. So, you know, we think platinum has been a bit out of favor for the automotive reason and because it hasn't done what it used to historically in

track gold. But though, but that um uh you know, as the year unfolds, we'll begin to see the true underlying fundamentals be begin to be reflexed in price. Okay. I think I think you're very right about it not being the outlier because I think I'm having very similar conversations when it comes to silver versus gold. And so just to just to sum up a little bit, if you want to know where the price is going to go, is it the above ground stocks that you really want to keep an eye on? Oh, I mean there's a lot of indicators

one could look at. So um the futures market if it's in contango or backquidation obviously backquidation shows that we're we're there's there's a shortage of material in the property market. There's also lease rates. Um those aren't necessarily freely available, but you can kind of impute them from data on from various different data sources. So um if we see elevated lease rates the market heading into backpidation that says that there's a shortage in the property market um and

that should reflect itself ultimately into um uh into higher prices going forwards. Okay. Okay. I think I think we're all we're all waiting to see when that will happen. So we'll keep an eye on that as well. And just just as we're wrapping up, so as we've been talking about, there's from the WPIC 47 476,000 ounce deficit projected for 2024. And we also recently got a forecast for the year from Johnson Matthew and it's close to 600,000 ounces. And of course, those are both very big numbers and different

entities will have different ways that they look at the market. But I think it's it's interesting. Investors are probably looking at them both. and if you could shed any light on how how the different numbers might come to be. So I I only um saw the the Jolson Mathy numbers yesterday. I haven't had a chance to fully unpack them yet, I'm afraid. Um but there are some slight differences in methodology particularly when it comes to um uh to to uh you know when answers are being counted

effectively. So whether it's on purchase or whether it's on use. We work on uh when things are actually deployed or or used or put into vehicles for example in the automotive industry. And I think I'm right and say I might need to double check this. I think JM works more on when uh purchases are being made. Okay. Okay. Good to good to go into that. Well, I will I will let you go, but before I do, I'll ask if there's anything else that you would pull out from the report that you would want

investors to notice about platinum right now. I think the key thing really is is just going back to that automotive um story and and um where investors are interested is in the potential for higher for longer automotive demand and and that um you know really sort of changing people's view versus that received wisdom of uh of constant and ongoing battery electrification. I mean we are going to electrify it. It's just the pace at which that happens that's uh that's being questioned.

Okay. Very good. Well, thank you so much for for taking the time to go over the report and we'll of course be checking within in with you again in a few months. So, thank you again. Thank you, Charlotte. Of course. And once again, I'm Charlotte Mloud with investing.com and this is Edward Stark. Thank you for watching. If you like this video, make sure you subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. We'll see you next time.