Covid-19’s impact on platinum is less than feared

The Covid-19 pandemic has harmed the platinum market, including price, demand, and supply. Still, the results of the report of the World Platinum Investment Council (WPIC) is quite promising. According to it, the first quarter of 2020 is showing that the net effect is less than feared. The outlook for the platinum this year is better than expected.

The price of platinum fell along with that of most stocks and metals, except for gold. During the crisis, the metal suffered declines of between 10% and 35% in March.

The total demand in the first quarter of 2020 decreased by 5% from the previous quarter. Meanwhile, the total supply decreased by 19% from the fourth quarter of 2019, which resulted in a surplus.

At the beginning of the quarter, demand in China decreased. However, non-pandemic events caused mine closing in South Africa, along with pandemic related closings, reduced the quarterly supply of platinum.

The report indicates that demand will be 18% less than the previous year due to the weak automotive and jewellery sales and lower investment.

Supply is forecast to decrease 13% YoY on the material impact of the smelter disruption and pandemic-related mining shutdowns.

As platinum prices declined to lowest levels in the decade during the three months, investors acted on the drop in prices as demand for bullion rose. Coins constituted 19% of total demand in the first quarter of 2020, compared to 2% in the previous quarter.

For the year, the investment demand for bullion and coins is expected to increase by 115%.

The automotive sector, the largest consumer of platinum metal, suffered a decrease in demand from 17% year-over-year, as COVID-19-induced plant closings led to a rapid drop in production manufacturing and an unprecedented decline in sales.

Total demand for automotive platinum is forecast to decline by 14% in 2020. Meanwhile, demand in China should increase by 14%.

Analysts have forecast the investment demand for coins and bars is to increase by 115% in 2020. It comes at a time when the price of platinum is at historic lows, said the WPIC.

The gradual introduction of China’s heavy-duty vehicle standards generates an increase in loads that exceeds the expected decrease in units produced. Similarly, the implementation of Bharat VI legislation in India in April 2020 is also likely to increase the demand for platinum despite current blocking restrictions.

Paul Wilson, CEO of the World Platinum Investment Council, said that reducing CO2 emissions remains a global imperative. Automakers in Europe have been preparing for this for several years. In 2020, we are likely to see increased demand for platinum. The automaker’s CO2 strategies include the full range of diesel and diesel hybrid vehicles already on sale with higher platinum loads.

The growth in demand for palladium is not related to COVID-19. There is a need to replace palladium with platinum in automatic catalysts in the world’s two largest passenger car markets, China and the US, Wilson added.