WPIC Latest Update on Aboveground Platinum Stocks

Monday May 25, 2015, 2:45pm PDT
By Teresa Matich+ - Exclusive to Platinum Investing News

Waiting for aboveground platinum stocks to hit zero? That isn’t likely to happen anytime soon, according to Paul Wilson, CEO of the World Platinum Investment Council (WPIC).

According to a report from Ian Walker of FastMarkets, Wilson told attendees of the recent Bloomberg and CME Precious Metals Forum that while he believes aboveground stocks will hit the lowest level on record this year, he doesn’t see stocks ever disappearing completely.

That might sound troubling to some investors — while platinum and palladium are now in their fourth year of structural deficit, aboveground stockpiles have continued to put pressure on the platinum price.

However, as Walker notes, Wilson is still positive on the metal. “They certainly don’t need to reach zero for sentiment to change and there could be a change to the price level in the marketplace,” he said.

That’s because platinum users and investors will need to stock up again before they run out completely. Explaining that point, Lawrence Williams of Mineweb states in an article that panelists at the conference talked about buying a few weeks’ worth of certain food items once they only had a few days’ worth left in the fridge.

Given the sharp drop in aboveground stocks over the past year, Williams suggests that the need to restock could come sooner rather than later; however, he also sees the shrinking platinum deficit — outlined in the WPIC’s quarterly report, released last week — as potentially throwing a wrench in the works. The WPIC revised its deficit prediction for 2015 down from 235,000 ounces to 190,000 ounces, but has kept its total supply forecast the same.

2015 forecasts

The WPIC first provided an estimate of aboveground platinum stockpiles back in December, forecasting that they would total 2.56 million ounces in 2014, a sizeable drop from an estimated 4.14 million ounces in 2012. As that report notes, figures for aboveground stocks are frequently discussed, but “traditionally have been hard to come by” — the WPIC’s stats were thus a welcome dose of transparency for the market.

In its latest update, the WPIC states that aboveground platinum stocks actually came in at 2.8 million ounces for 2014. It expects them to drop 7 percent this year, to 2.61 million ounces. For the first quarter, the WPIC estimates that aboveground stocks have been reduced to 2.64 million ounces, but suggests that supply will more closely match demand over the rest of the year.

Certainly, despite the shrinking deficit, some market watchers are still calling for a higher platinum price by the end of the year. For example, Rick Rule, founder of Sprott Global Resource Investments, told MarketWatch that he expects the year-end platinum price to hit $1,250 per ounce, while Simona Gambarini of Capital Economics told the publication she expects platinum to reach $1,400 per ounce.

So far in 2015, the spot platinum price has lost about 4 percent, or $48, to trade at $1,148 per ounce. The metal hit a low of $1,091 per ounce on March 17, and has risen by about 5.2 percent since then.