Edward Sterck: Platinum in "Deep Deficit" Again, What to Watch in 2026

Key Concepts

• Platinum Deficit: A situation where the demand for platinum exceeds its supply.
• Above Ground Stocks: Platinum reserves held in warehouses, vaults, or other storage facilities, not currently in use.
• Lease Rates: The cost of borrowing platinum, indicating market tightness.
• Outright Purchases: Buying platinum outright rather than leasing it.
• ETF Profit Taking: Selling platinum held by Exchange Traded Funds, often to realize gains.
• CME Exchange Stock Inventories: Platinum held in inventory on the Chicago Mercantile Exchange.
• Section 232 Investigation: A US investigation into the impact of critical mineral imports on national security.
• Palladium Anti-Dumping Investigation: A US investigation into alleged unfair pricing of Russian palladium.
• Substitution Effect: The ability to use one metal (e.g., platinum) in place of another (e.g., palladium) in certain applications.
• Physical Bar and Coin Demand: Investment in platinum in the form of physical bars and coins.
• Automotive Demand: Platinum used in catalytic converters for vehicles.
• Industrial Demand: Platinum used in various industrial processes, such as glass manufacturing and chemical production.
• Mine Supply: Platinum extracted from the earth through mining operations.
• Recycling Supply: Platinum recovered from end-of-life products, such as vehicles and jewelry.
• Guangzhou Futures Exchange: A new futures exchange in China for platinum and palladium.

2025 Platinum Market Review

Edward Sturk, Director of Research at the World Platinum Investment Council, provides an overview of the 2025 platinum market, characterized by a third consecutive year of a substantial deficit.

• Deficit Forecast: The projected deficit for the full year 2025 is 692,000 ounces. This is significant when considering the total annual demand is just under 8 million ounces.
• Supply-Driven Tightness: The deficit is primarily attributed to a lack of supply rather than strong demand growth. Total demand was actually expected to be down year-on-year.
• Price Action: The year saw a notable price rally, beginning around London Platinum Week in May. At its peak, platinum was up 88% year-to-date, making it the strongest performing commodity for a period. While silver has since surpassed it, platinum prices have remained extremely robust and have entered a period of consolidation.
• Factors Driving Price:
  • Third Year of Deficits: Persistent supply shortages.
  • Depletion of Above Ground Stocks: Reserves have fallen to unsustainably low levels, impacting market liquidity.
  • Elevated Lease Rates: The cost of borrowing platinum is at historically elevated levels, signaling a shortage in the prompt market. The leasing market, which has averaged about 30 million ounces annually over the last five years, is seeing a shift.
  • Shift to Outright Purchases: Due to high lease rates, market participants are switching from leasing to outright purchases of platinum. This trend appears to have coincided with the price rally in May-June.
• Persistent Market Tension: Elevated lease rates and strong backwardation in the London OTC market indicate that tight market conditions are expected to persist.

2026 Platinum Market Outlook

The World Platinum Investment Council's report forecasts a shift towards a balanced market in 2026, but with significant nuances.

• Projected Surplus: A tiny surplus of 20,000 ounces is forecast for 2026.
• Contingencies for Balance: This balance is contingent on two key factors:
  • ETF Profit Taking: An expected 170,000 ounces of profit taking from ETFs. This is dependent on a high platinum price, and there's a risk associated with this outlook, as ETF holdings have remained broadly unchanged in 2025 despite the price rally, suggesting holders expect even higher prices.
  • CME Exchange Stock Outflows: 150,000 ounces flowing out of CME exchange stock inventories to become available to the market.
• Risk of Continued Deficit: If ETF profit taking and CME inventory unwind do not occur as anticipated, the market would remain in a substantial deficit of nearly 400,000 ounces for 2026.
• Unresolved Stock Shortage: A balanced market in 2026 does not resolve the issue of depleted above-ground stocks, which has been a major catalyst for price action and market tightness. The shortage of metal in the market is not expected to be solved by a balanced year.

Trade Tensions and US Investigations

Trade tensions, particularly those driven by the US, are a critical factor influencing the 2026 market outlook.

• Section 232 Investigation (Critical Minerals):
  • Focus: Examines whether the supply of critical minerals from outside the US poses a threat to national security.
  • Threshold: The threshold for concluding a national security threat can be low, such as foreign imports damaging the US domestic industry to the point of unavailability during an emergency.
  • Potential Outcomes: Recommendations could include import surcharges or quotas to strengthen the US domestic industry.
  • Presidential Discretion: The final decision rests with the President, who can choose to accept or ignore the recommendations. An example is the 2019 uranium investigation, where recommendations were ignored.
  • Timing: Initial decisions are expected around December 29th and January 6th, though potential delays due to government shutdowns are possible.
• Palladium Anti-Dumping Investigation (Russian Origin):
  • Finding: The US ITC has already determined that Russia has been dumping palladium into the market at uncompetitive rates, aided by state subsidies.
  • Next Steps: Determining appropriate action, which could include import duties or quotas on Russian-origin palladium.
  • Platinum Feed-Through Impact: This investigation has a feed-through impact on platinum due to the potential for substitution between platinum and palladium in catalytic converters.
• Interdependence: The availability of metal from exchange stocks (crucial for the 2026 balance) is likely to be influenced by an easing of US tariff fears.

Platinum Investment Demand

Investment demand for platinum is projected to reach a 5-year high in 2025, with differing dynamics in various markets.

• Physical Bar and Coin Demand:
  • China's Strength: Significant strength in demand from China, which has grown from near zero in 2019 to become the largest market for platinum investment products. This momentum is expected to continue, though perhaps at a slower pace in 2026.
  • US Challenges: High lease rates have made manufacturing physical investment products in the US prohibitively expensive. Fabricators often lease metal and close the lease upon sale, and the current lease rates necessitate large premiums, leading to a shortage of product despite strong underlying demand.
• ETFs: Holdings have been broadly unchanged in 2025.
• 2026 Investment Demand: The projected step-down in total investment demand for 2026 is not due to a decline in physical demand but rather the anticipated ETF profit taking and exchange stock outflows.

Platinum Jewelry Demand

• China's Growth: A significant increase in platinum jewelry demand from China.
  • Drivers: This is linked to a combination of high gold prices and a general flight to hard assets.
  • Jewelry Nuance: Gold jewelry sales have fallen due to high gold prices, prompting wholesalers to offer alternative, lower-cost platinum products.
  • Q2 Overexcitement: The market may have become overly enthusiastic in Q2 with increased wholesaler offerings and restocking.
  • Outlook: Good double-digit growth in jewelry demand is expected for China in 2025 and likely into 2026, though not at the pace seen earlier in the year.
  • Market Education: China is a "yellow metal" market, requiring consumer education and advertising to fully capitalize on platinum jewelry demand potential.
• Global Context: While not explicitly detailed for other regions, the shift in China is a key driver.

Automotive and Industrial Demand

• Automotive Demand:
  • Sustained Strength: Automotive demand for platinum and palladium is continuing to be higher for longer.
  • Electrification Transition: The transition towards electrification is expected to be at a fairly slow pace.
  • Projected CAGR: Over the next five years, automotive demand for platinum plus palladium is projected to have a negative 1.7% CAGR, indicating a modest pace of decline.
• Industrial Demand:
  • 2025 Low: 2025 was expected to be a low year for industrial demand from a cyclical perspective, with fewer new facilities being constructed in industries like glass manufacturing, which are significant users of platinum.
  • Recovery Expected: A step-up in industrial demand is expected from 2026, dependent on the timing of new facility openings in sectors like glass, chemicals, and petroleum refining.
  • Historical Growth: Industrial demand has averaged about a 3% CAGR since 2013, though year-to-year volatility is common.

Platinum Supply

• Mine Supply:
  • 2025 Decline: Mine supply is forecast to be down 5% in 2025.
  • Miner Challenges: While higher prices are helping to put miners in a more robust position, the nature of deep-level underground mines means output cannot be flexed rapidly.
  • Investment Lag: Meaningful investment to increase output would require sustained PGM price strength for several years, followed by several more years for project delivery.
  • Future Outlook: Mine supply is likely to remain at or around current levels for the foreseeable future.
• Recycling Supply:
  • Price Elasticity: Recycling supply is more price elastic than mine supply.
  • 2026 Increase: A reasonable increase in recycling supply volumes is expected in 2026, driven by automotive and some jewelry recycling.
  • Constraints: Limitations include a shortage of end-of-life vehicles and financial considerations in certain geographies.
  • Growth Expectation: Healthy growth in recycling supply is anticipated over the next few years.

Price Outlook and Investment Case

While the World Platinum Investment Council does not forecast prices, they offer insights into factors influencing them.

• Price Rally's Ineffectiveness: The price rally in 2025 has not solved the deficit. Normally, prices would rise to incentivize supply or disincentivize demand. The current elevated prices are insufficient to attract more supply or draw down above-ground stocks.
• Guangzhou Futures Exchange: The launch of the Guangzhou futures exchange in China is significant. It's already seeing substantial volumes and will allow Chinese investors to influence international price discovery for platinum and palladium.
• Investment Case:
  • Robust Fundamentals: The underlying fundamentals for platinum remain robust.
  • Structural Deficit: A deficit would likely persist in 2026 without the assumed ETF profit taking and easing of trade tensions.
  • Constrained Supply: Despite expected recycling recovery, the overall supply picture remains constrained.
  • Strong Demand Outlook: Demand prospects are considered strong.

In conclusion, the platinum market has experienced a significant deficit and price rally in 2025 due to supply constraints. While 2026 is forecast to be a balanced year, this balance is precarious and dependent on specific market events and trade policy developments. The underlying fundamentals, including robust demand and constrained supply, suggest a strong investment case for platinum, even with the market moving towards balance.