Platinum price analysis as demand and supply dynamics shift

Platinum price has bounced back in the past few days as investors focus on China’s reopening and the expected deficit in the industry. The metal was trading at $986.50, which is about 8.81% above the lowest level this month and ~20% above its lowest point in 2022.

Platinum supply deficit

The main catalyst for platinum prices is the fact that the industry is expected to move from a supply surplus to a material deficit as supply narrows and demand rises. 

The most recent platinum news was a report by World Platinum Council showed that the industry will have a deficit of 556 koz this year after moving to a 776 koz surplus in 2022. In its statement, the report noted that mining and recycling will slow this year.

According to the report, the supply will be affected by the ongoing production challenges in South Africa, which is going through a major power crisis. Also, sanctions on Russia are having some impact on the platinum industry.

Demand, on the other hand, is expected to be much higher in 2023 as the Chinese economy recovers. As I wrote in this report, data published on Friday showed that the country’s manufacturing and composite PMIs were stronger than expected. Manufacturing PMI came in at 51.9 in March while the composite PMI increased to 57. 

This performance is a sign that the manufacturing sector was doing well after the country lifted its Covid-zero mandate. Recent data shows that the industry will continue recovering this year. In a recent report, Global Data said that total light car sales in Europe will be about 16.1 million, up from last year’s high of 14.8 million. 

A separate report said that China’s auto sales in 2023 will rise by 3% to 27.6 million. The same trend will likely continue in other countries like the US and Canada. These reports are important because platinum is used widely in the auto sector, where it is used to manufacture catalytic converters.

Platinum price prediction

Platinum chart by TradingView

The daily chart shows that platinum price has recovered modestly in the past few days. This recovery started after the metal fell to a low of $903.23 on February 23rd. It has moved to the 25-day and 50-day exponential moving averages and formed a small ascending channel. 

Platinum has moved slightly above the key support at $970.30, the highest point on August 11. It is also above the ascending trendline shown in green. Therefore, there is a likelihood that it will have a bearish breakout and retest the year-to-date low of $905.