PLATINUM QUARTERLY PRESENTATION Q London 21 st November, 2017

Transcription

1 PLATINUM QUARTERLY PRESENTATION Q London 21 st November, 2017

2 COPYRIGHT AND DISCLAIMER IMPORTANT NOTICE AND DISCLAIMER: This publication is general and solely for educational purposes. The publisher, The World Platinum Investment Council, has been formed by the world s leading platinum producers to develop the market for platinum investment demand. Its mission is to stimulate investor demand for physical platinum through both actionable insights and targeted development: providing investors with the information to support informed decisions regarding platinum; working with financial institutions and market participants to develop products and channels that investors need. No part of this publication may be reproduced or distributed in any manner without attribution to the authors. Unless otherwise specified in this document all material is World Platinum Investment Council Material sourced from third parties may be copyright material of such third parties and their rights are reserved. Content within the publication that has been provided by SFA, one of our third party providers, is SFA Copyright reserved. All copyright and other intellectual property rights in such content contained in this publication remain the property of SFA, and no person other than SFA shall be entitled to register any intellectual property rights in the information, or data herein. The analysis, data and other information attributed to SFA reflect SFA s judgment as of the date of the document and are subject to change without notice. No part of the content provided by SFA shall be used for the specific purpose of accessing capital markets (fundraising) without the written permission of SFA. This publication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. With this publication, neither the publisher nor SFA intend to transmit any order for, arrange for, advise on, act as agent in relation to, or otherwise facilitate any transaction involving securities or commodities regardless of whether such are otherwise referenced in it. This publication is not intended to provide tax, legal, or investment advice and nothing in it should be construed as a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. Neither the publisher nor SFA is, or purports to be, a broker-dealer, a registered investment advisor, or otherwise registered under the laws of the United States or the United Kingdom, including under the Financial Services and Markets Act 2000 or Senior Managers and Certifications Regime or by the Financial Conduct Authority. This publication is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your investment objectives, financial circumstances and risk tolerance. You should consult your business, legal, tax or accounting advisors regarding your specific business, legal or tax situation or circumstances. The information on which this publication is based is believed to be reliable. Nevertheless, neither the publisher nor any third party can guarantee the accuracy or completeness of the information. This publication contains forward-looking statements, including statements regarding expected continual growth of the industry. The publisher notes that statements contained in the publication that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect actual results and neither the publisher nor any third party accepts any liability whatsoever for any loss or damage suffered by any person in reliance on the information in the publication. The logos, services marks and trademarks of the World Platinum Investment Council are owned exclusively by it. All other trademarks used in this publication are the property of their respective trademark holders. The publisher is not affiliated, connected, or associated with, and is not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by the publisher to any rights in any third-party trademarks. 2

3 AGENDA: PLATINUM QUARTERLY Q3 2017, 2017 AND 2018 FORECASTS 1. Introduction Paul Wilson, CEO, WPIC 2. Platinum Quarterly, Fundamentals review Trevor Raymond, Director of Research, WPIC 3. Fundamental insights Trevor Raymond Beresford Clarke, Managing Director & Head of Research, SFA (Oxford) Ltd 4. Questions Paul Wilson Trevor Raymond Marcus Grubb, Director of Market Development, WPIC Beresford Clarke 3

4 AGENDA: PLATINUM QUARTERLY Q3 2017, 2017 AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Supply, demand and balance Q forecast 2018 forecast Trevor Raymond, Director of Research, WPIC 3. Fundamental insights Trevor Raymond Beresford Clarke 4. Questions Paul Wilson Trevor Raymond Marcus Grubb Beresford Clarke 4

5 Q SUPPLY: YoY AND QoQ WEAKNESS CONTINUES SUPPLY Q // Q Q Refined Production 1,620 1,550 1,495 South Africa 1,180 1,090 1,075 Zimbabwe North America Russia Other Inc (-)/Dec (+) in Producer Inventory Total Mining Supply 1,515 1,625 1,485 Recycling Autocatalyst Jewellery Industrial SA supply down 125 koz YoY and 10 koz inventory build in Q3 17 Total supply fell 140 koz QoQ (-7%) and down 60 koz YoY (-3%) Annual downward trend continues Total Supply 2,025 2,105 1,965 Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 5

6 MINING SUPPLY: DECLINE CONTINUES, NO INVENTORY DRAWDOWN Total mining supply and refined production No drawdown of refined metal in Q3 17 Furnace maintenance and other temporary factors impacted Q strike effect aside, declining trend visible Refined production Total mining supply Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 6

7 RECYCLING SUPPLY: FLAT QoQ Autocatalyst and jewellery recycling Autocatalyst Jewellery Past fears of autocatalyst recycle growth did not materialise Changing mix of catalyst substrates potential headwind Jewellery scrap -23% YoY, high 2016 not repeated Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 7

8 Q DEMAND: FLAT AUTO, WEAK JEWELLERY, INDUSTRIAL AND INVESTMENT DEMAND Q // Q Q Automotive Autocatalyst Non-road Jewellery Industrial Chemical Petroleum Electrical Glass Medical & Biomedical Other Investment Change in Bars, Coins Change in ETF Holdings Change in Stocks Held by Exchanges Q3 17 automotive demand in line with usual seasonal trend +1% YoY and down 8% QoQ Industrial demand weakness on plant closures and capacity expansion timings ETF sales driven by profit taking as platinum prices hit $1,000/oz in early Sept Total Demand 1,940 1,970 1,785 Balance Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 8

9 koz koz Q DEMAND: AUTOCATALYST DEMAND DOWN SEASONALLY Autocatalyst demand, quarterly ,000 1,800 Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Autocatalyst demand, half-yearly Autocatalyst demand shows typical seasonal decline in Q3 17 (+1% YoY) Losses in Western Europe, as diesel share falls faster than growth in vehicle sales India auto sales recovering 1,600 1,400 1,200 1,000 H2'14 H1'15 H2'15 H1'16 H2'16 H1'17 H2'17f Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 9

10 Q DEMAND: JEWELLERY DEMAND LAGGING IN CHINA; CONTINUED STRENGTH IN INDIA Jewellery demand Jewellery demand 625 koz in Q3 17, flat QoQ and down 3% YoY Jewellery demand growth and economic drivers China platinum jewellery demand lagging better jewellery market (gold jewellery demand +13% YoY) Pt jwl demand HK tourists Gold/Silver jwl sales India stock build contributing to continued strong demand despite weak jewellery market (gold jewellery demand -25% YoY) Source: Hong Kong Tourism Board, National Bureau of Statistics of China, WPIC Platinum Quarterly Q3 2017, SFA (Oxford), World Gold Council - Q Gold Demand Trends 10

11 Q DEMAND: INDUSTRIAL DEMAND LOWER ON NET FALLS IN GLASS AND PETROLEUM Industrial demand Net platinum demand was 385 koz in Q3 17, down 75 koz (-16%) YoY Weaker net demand from glass fabrication (40 koz YoY) and petroleum refining (-30 koz YoY) due to timing of capacity changes Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 11

12 Q DEMAND: PROFIT TAKING IN ETFs, BAR/COIN DEMAND POSITIVE Investment demand by category Q1 17 Q3 17 net investment of 160 koz ETF selling in UK and SA, partially offset by buying in the US 10 koz coin sales in the US from sales of American Eagle proof coin, 1.8 koz of BullionVault net purchases in Q3 17 Bar and coin ETFs Exchange stocks Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 12

13 2017 FORECAST: MARKET IN BALANCE SUPPLY f YoY, oz YoY, % Refined Production 6,035 5, % South Africa 4,255 4, % Zimbabwe % North America % Russia % Other % Inc (-)/Dec (+) in Producer Inventory % Total Mining Supply 6,065 5, % Recycling 1,855 1, % Autocatalyst 1,225 1, % Jewellery % Industrial % Total Supply 7,920 7, % DEMAND Automotive 3,415 3, % Jewellery 2,605 2, % Industrial 1,795 1, % Investment % Total Demand 8,320 7, % Mining supply down 2% YoY despite inventory sales Automotive, and jewellery demand, areas of market concern, actually flattish YoY Fall in industrial and investment demand drives a 6% YoY fall in demand and balanced market Balance Above Ground Stocks 1,895 1, % Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 13

14 2018 FORECAST: SUPPLY FALLING, DEMAND GROWING, MARKET IN DEFICIT SUPPLY 2017f 2018f YoY, oz YoY, % Refined Production 5,935 5, % South Africa 4,230 4, % Zimbabwe % North America % Russia % Other % Inc (-)/Dec (+) in Producer Inventory % Total Mining Supply 5,970 5, % Recycling 1,860 1, % Autocatalyst 1,290 1, % Jewellery % Industrial % Total Supply 7,830 7, % DEMAND Automotive 3,365 3, % Jewellery 2,590 2, % Industrial 1,640 1, % Investment % Total Demand 7,845 8, % SA refined production down a further 2% in 2018 as announced mine closures annualise Normalisation in industrial demand and increase in jewellery demand drive demand growth of 2% YoY Automotive demand only a small headwind Balance Above Ground Stocks 1,880 1, % Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 14

15 AUTOMOTIVE EUROPE WEAKNESS, REST OF WORLD STRENGTH Automotive demand (koz) 2018 automotive demand expected to fall 1% YoY to 3,335 koz Change in automotive demand (YoY, koz) Europe UK a drag with diesel sales expected -9% YoY; moderate growth in Germany, Spain, Italy Demand growth in US, India and Rest of World Source: WPIC Platinum Quarterly Q3 2017, SFA (Oxford) 15

16 AGENDA: PLATINUM QUARTERLY Q3 2017, 2017 AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Trevor Raymond 3. Fundamental insights Trevor Raymond, Director of Research, WPIC Beresford Clarke, Managing Director & Head of Research, SFA (Oxford) Ltd 4. Questions Paul Wilson Trevor Raymond Marcus Grubb Beresford Clarke 16

17 AUTOMOTIVE PRICING MOMENTUM DIVERGING FROM AUTO MOMENTUM Car registration momentum vs platinum / palladium momentum US and China vehicle registrations increased more than Europe registrations since 2005 Palladium price increased more than platinum since 2010 Positive momentum in US and China vehicle registrations vs Europe are starting to taper Palladium vs platinum price ratio still at an all time high Source: WPIC Research, ACEA, OECD, Bloomberg 17

18 PLATINUM INDUSTRIAL OR PRECIOUS METAL? Correlation with copper, gold, absolute difference to date Precious metal with an industrial premium Industrial metal with a precious floor Precious metal with an industrial discount Correlation with copper (ex USD) Correlation with gold (ex USD) Premium / discount to gold (USD/oz) Industrial vs precious metal price performance Platinum trading as a precious metal with an industrial discount High and persistent correlation with gold Lower, still significant correlation with copper Absolute discount to gold European diesel, electric vehicle headwinds driving industrial discount we believe these headwinds are overestimated Source: WPIC Research, ACEA, OECD, Bloomberg Platinum lagging other metals with industrial demand 18

19 SWITCHING HOW MAY IT HAPPEN? Platinum premium to palladium ($/oz) Platinum to enter gasoline autocatalysts? Price action has intensified speculation on switching Indicative timeline Scientific testing weeks to months Certification 1-2 years Change in PGM consumption from 3 years Change in PGM buying earlier Anecdotal evidence suggests European and US automakers are testing increasing platinum loadings on gasoline autocatalysts Market assumption that this may not be meaningful for 2-3 years we believe impact could be more near term Source: WPIC Research, Bloomberg 19

20 SWITCHING WHAT COULD THE IMPACT BE? Autocatalyst demand (koz 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Palladium Platinum W. Europe Japan North America China RoW Palladium demand is 2.6x platinum demand Small amount of switching could lead to significant impact on platinum market Scenario assumes: Platinum autocatalyst demand (koz) Scenario 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, c500koz platinum demand + 20% N. Am + 5% W. Europe 2017 Base Scenario W. Europe Japan North America China RoW 20% of North American palladium demand replaced by platinum demand; 5% of European palladium demand is replaced by platinum demand* 1:1 ratio (i.e. 1oz of platinum replaces 1oz of palladium) Source: SFA (Oxford) Data; WPIC Research scenario. NOTE* Europe switching assigned a smaller %, given a proportion of European palladium demand is from diesel 20

21 PRIMARY SUPPLY: LARGEST CUTBACK IN A DECADE Mothballed existing and future platinum capacity koz 600 Pt Mine closures 1 m oz Partial closures 465 koz Shaft delays 550 koz Largest annual adjustment since moz Mine closures Partial closures Shaft delays Cum. Pt (rhs) Source: SFA (Oxford) Ltd 21

22 1,640 1,795 1,790 INDUSTRIAL DEMAND: RECOVERY FORECAST IN 2018 Industrial Pt demand: koz 1,850 Chemical Petroleum Electrical Glass Medical Other 1,800 Almost back to 2016 levels by ,750 1, koz (-9%) +150 koz (+9%) , ,600 1, f 2018f Source: SFA (Oxford) Ltd 22

23 AGENDA: PLATINUM QUARTERLY Q3 2017, 2017 AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Trevor Raymond 3. Fundamental insights Trevor Raymond Beresford Clarke 4. Questions Paul Wilson, CEO, WPIC Trevor Raymond. Director of Research, WPIC Marcus Grubb, Director of Market Development, WPIC Beresford Clarke, Managing Director & Head of Research, SFA (Oxford) Ltd 23

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