JOHANNESBURG (miningweekly.com) – China’s importation of platinum has shifted platinum’s supply balance into deficit, says independent precious metals consultant Dr David Davis.

Supply-and-demand forecasts presented to the market are not giving the complete picture, Davis contends in a 17-page analysis published by Singapore-based Auctus Metal Portfolios.

This has led to the contradiction of global markets reporting significant surpluses while exhibiting distinct tightness, he points out.

When taking China’s imports into account, global above-ground stocks are significantly higher than the level reported, according to his calculations. (See attached graphic.)

Above-ground inventory in China is globally immobile in that it is imported but not exported, and Davis finds that recognition is not being given to the correct equation to calculate stock, namely that stock equals imports minus demand, minus exports.

The contention that China’s platinum imports are continuing to run well ahead of identified demand dovetails with the comment of the World Platinum Investment Council (WPIC), which put ‘excess/unexplained’ 2021 imports at about 1.3-million ounces, a number well in excess of the estimated 2021 global platinum surplus of 769 000 oz. WPIC stated further that while the flow of excess imports into China had not been captured in its supply/demand analyses, elevated lease rates as well as the reduction in New York Mercantile Exchange stocks suggested that China would continue to import more than it used – “a very big driver that puts a ‘bit of a contradiction’ into a market that’s in massive surplus, yet the market is tight”.

Moreover, additional autocatalyst loadings, rapid hydrogen fuel cell development and green technologies are poised to add to demand for platinum group metals, as is the price mismatch between palladium and platinum, which is driving original equipment manufacturers to substitute palladium with platinum in petrol-driven combustion vehicles.

Under these circumstances, Davis expects China to likely continue to add still further to its platinum inventory, particularly when the platinum price is down.

In doing so, he anticipates the likelihood of it becoming an upside price risk in the medium to long term, “as China would literally suck platinum out of the system, which would, in turn, further contribute to a tightening in the platinum market, which would put upward pressure on the price of platinum”.

Global platinum mine supply is heavily dependent on supply from South Africa (72%) as well as Russia (12%). Supply from North America (6%) and Zimbabwe (7%) is small by comparison.

“This distortion in regional supply distribution becomes strategically important should the supply of platinum from the South African platinum mining industry decline and platinum and palladium exports from Russia to the West be blocked by British, European and American sanctions,” says Davis, in noting that South Africa’s platinum industry has in the past faced electricity shortages, increased costs, prolonged industrial action and heightened community action.

In 2021, platinum mining companies began to invest in reserve replacement but Davis describes the quantum of investment as being unlikely to stave off the overall decline in platinum supply, or return the platinum markets to surplus any time soon.

Davis’ research relies on an audited global trade database compiled by the United Nations Comtrade International Trade Statistics Division, which provides yearly information on imports and exports of platinum by country, as well demand data published by a range of other recognised providers of demand data.