PLATINUM QUARTERLY PRESENTATION Q London 14 th May, 2018

Transcription

1 PLATINUM QUARTERLY PRESENTATION Q London 14 th May, 2018

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 Q AND 2018 FORECASTS 1. Introduction Paul Wilson, CEO 2. Platinum Quarterly, Fundamentals review Trevor Raymond, Director of Research 3. Fundamental insights Trevor Raymond 4. China update Weibin Deng, Head of China 5. Questions Paul Wilson Trevor Raymond Weibin Deng 3

4 AGENDA: PLATINUM QUARTERLY Q AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Supply, demand and balance: Q1 18, 2018f Trevor Raymond, Director of Research 3. Fundamental insights Trevor Raymond 4. China update Weibin Deng 5. Questions Paul Wilson Trevor Raymond Weibin Deng 4

5 WPIC RESEARCH IS MIFID II COMPLIANT WPIC Research MiFID II Status The World Platinum Investment Council (WPIC) has undertaken an internal and external review of its content and services for MiFID II. As a result WPIC highlights the following to the recipients of its research services, and their Compliance/Legal departments: WPIC research content falls clearly within the Minor Non-Monetary Benefit Category, and can continue to be consumed by all asset managers free of charge. WPIC research can be freely shared across investment organisations. 1. WPIC does not conduct any financial instrument execution business. WPIC does not have any market making, sales trading, trading or share dealing activity. (No possible inducement). 2. WPIC content is disseminated widely and made available to all interested parties through a range of different channels, therefore qualifying as a Minor Non-Monetary Benefit under MiFID II (ESMA/FCA/AMF). WPIC research is made freely available through the WPIC website. WPIC does not have any permissioning requirements on research aggregation platforms. 3. WPIC does not, and will not seek, any payment from consumers of our research services. WPIC makes it clear to institutional investors that it does not seek payment from them for our freely available content. More detailed information is available on the WPIC website: 5

6 WPIC FORECASTS NOW AVAILABLE THROUGH BLOOMBERG Selection of Bloomberg tickers SUPPLY DEMAND METRICS Long name Global Platinum Refined Production South Africa Platinum Refined Production Zimbabwe Platinum Refined Production Global Platinum Supply Global Platinum Demand Automotive Autocatalyst Global Platinum Demand Investment Change in Bars Coins Global Platinum Above Ground Stocks REGIONAL DEMAND METRICS Long name Western Europe Platinum Gross Demand Automotive China Platinum Gross Demand Jewellery North America Platinum Gross Demand Petroleum Japan Platinum Gross Demand Electrical Rest of World Platinum Gross Demand Medical and Biomedical Ticker code PIWWPR PIZAPR PIZWPR PIWWSO PIWWDMAC PIWWDMIB PIWWST Ticker code PIWEGDAU PICNGDJW PINAGDPE PUJPGDEL PIWWGDMO 78 individual Bloomberg tickers available to download Platinum Quarterly data Multi-year, Quarterly and Annual data available Research notes (including Platinum Quarterly, Platinum Perspectives and Platinum Essentials) also available through WPIC s Bloomberg page Source: Bloomberg. Full list of Bloomberg tickers available on WPIC website: 6

7 Q1 18 IN DEFICIT, ON FLAT DEMAND AND WEAK SUPPLY Global and S.A. supply down in Q1 S.A. refined down -35 koz due to process lock-up of c80 koz No sales from working inventory Total supply +75 koz YoY as recycle remains strong Market in 125 koz deficit but full year surplus as lock-up is released Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 7

8 Q1 IS SEASONALLY WEAK. NO WORKING INVENTORY CHANGES Total mining supply and refined production Refined production -12% QoQ and -3% YoY Improved South African mining efficiencies but weak Q1 refined due to concentrate lock-up No inventory drawdown despite low refined working inventory tight Refined production Total mining supply Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 8

9 2018 SUPPLY REVISED UP, BUT GLOBAL SUPPLY DECLINE CONTINUES South Africa refined production and global mining supply Despite weak Q1 refined supply from S.A, the March 2018 forecast has been increased 2017 actual was 20% above initial 2016 forecast due to higher mining efficiency Improved safety and improved Section 54 process in 2017 is expected to continue in 2018 However, global mining supply lower in 2018 than in 2017 and in 2015 Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 9

10 Q1 18 DEMAND FLAT. JEWELLERY AND INDUSTRIAL RISES OFFSET WEAK AUTO DEMAND Q // Q Q Automotive Autocatalyst Non-road Jewellery Automotive down -4% YoY, and -3% QoQ reflecting falling diesel sales Jewellery firm +5% YoY, after strong Q4 Industrial Chemical Petroleum Electrical Glass Medical & Biomedical Other Industrial rebound as expected Investment Change in Bars, Coins Change in ETF Holdings Change in Stocks Held by Exchanges Total Demand 1,985 2,050 1,975 Balance Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) Total demand flat (-10 koz) as industrial and jewellery growth offset declines 10

11 AUTOCATALYST PLATINUM DOWN ON FALLING DIESEL SALES Autocatalyst demand, quarterly Automotive demand down -35 koz YoY Third consecutive Q1 fall as European diesel share falls to 38.5% Change in European cars Q vs Q Gasoline 91% of lost diesel sales; CO 2 increase continues Increased pressure on OEMs to engage consumers and cities to keep diesel in their fleets and avoid heavy fines Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford). Bottom chart - ACEA, LMC, WPIC Research. HEVs Hybrid Electric Vehicles; BEVs Battery Electric Vehicles; PHEVs Plug-in Hybrid Electric Vehicles. European countries selected on the basis of both diesel and Alternative Fuel Vehicle data; representing c90% of EU+EFTA vehicles 11

12 JEWELLERY REBOUND CONTINUES Jewellery demand Jewellery demand up +5% YoY Momentum maintained after strong Q4 Strong retail growth in China supports platinum YoY growth in Q1 India growth strength continues Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 12

13 INDUSTRIAL UP AS EXPECTED: 2018 RETURNS TO 2016 LEVELS Industrial demand Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 13

14 INVESTMENT FIRM ON STRONG BAR & COIN, FLAT ETF Investment demand by category Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) Bar and coin ETFs Exchange stocks 14

15 2018: SMALLER SURPLUS WITH SUPPLY DOWN AND DEMAND FLAT SUPPLY f YoY, oz YoY, % Refined Production 6,145 6, % South Africa 4,385 4, % Zimbabwe % North America % Russia % Other % Inc (-)/Dec (+) in Producer Inventory % Total Mining Supply 6,175 6, % Broad-based decline in mine supply continues Recycling 1,905 1, % Autocatalyst 1,340 1, % Jewellery % Industrial % Total Supply 8,080 7, % DEMAND Automotive 3,390 3, % Jewellery 2,460 2, % Industrial 1,655 1, % Investment % Total Demand 7,765 7, % Balance Automotive decline reflecting loss of diesel sales but strong Industrial and recovering Jewellery Market surplus in koz lower than in 2017 Above Ground Stocks 2,220 2, % Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 15

16 AGENDA: PLATINUM QUARTERLY Q AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Trevor Raymond 3. Fundamental insights Trevor Raymond, Director of Research 3. China update Weibin Deng 4. Questions Paul Wilson Trevor Raymond Weibin Deng 16

17 INVESTMENT DEMAND POTENTIAL: PLATINUM AS GOOD AS GOLD Platinum & gold prices & correlation (USD effects removed) Evidence of gold s ability to enhance portfolio returns established and well known Platinum remains in lockstep with gold and consequently offers similar benefits WPIC encouraging more funds that include gold to consider platinum Source: Bloomberg, WPIC research. Based on weekly returns. 17

18 INVESTMENT DEMAND POTENTIAL: PLATINUM AS GOOD AS GOLD Platinum premium / discount to gold (US$/oz) Platinum s premium to gold declined partly due to increased demand for gold-containing indices. Gold always fully priced but platinum offers undervalued entry point, similar portfolio benefits and upside potential Source: Bloomberg, WPIC research. Based on weekly returns. 18

19 DIESEL CAR SALES FALL FURTHER BUT AUTOMAKERS SPEAK UP TO PROMOTE DIESEL Automakers now backing their diesel cars: if they have clean on-road diesel Automakers with clean diesels It will not be possible to meet the EU s strict CO 2 targets for 2020 without diesel cars Future mobility will definitely depend on diesels as well Automakers catching up We have to lessen our reliance on diesel substantially The cost of making diesel reach the new standards is going to become prohibitive Further improving the diesel engine is better than banning it. +ve automaker diesel statements are increasing watch and wait continues on share & loadings NO x crisis not resolved but cost of alternatives (BEV / Hybrid) is high (but not publicly shown) Diesel NO x control is more cost effective and predictable than increasing slow BEV & hybrid sales Source: WPIC research 19

20 INCREASED PALLADIUM SUPPLY RISK MAKES SWITCHING TO PLATINUM MORE LIKELY Palladium remains a by-product with price set by value-in-use / best alternative cost Palladium is a cost-effective alternative to platinum in gasoline engine emissions control Platinum price strength should also drive the palladium price Increased palladium supply concerns on global trade tensions Platinum availability risk key but ($/Oz) premium to platinum also driver of substitution Autocatalyst demand (koz) Pd to Pt substitution scenarios show demand growth potential in platinum 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 FCEV market share ONLY A 6% SHARE FOR FCEV WILL DOUBLE PLATINUM AUTOMOTIVE DEMAND Battery Electric Vehicles (BEVs) Fuel Cell Electric Vehicles (FCEVs) Platinum Platinum loading (g/car) demand (moz) % % BEV success (@30% LT) drove $1bn Lithium ETF Platinum in FCEV (@6% LT) = 3.5moz p/a 4.5% % % Source: WPIC research 21

22 80% OF BEV AND FCEV PLATFORM THE SAME Battery Electric Vehicle (BEV) Range and recharge consumer barriers Fuel Cell Electric Vehicle (FCEV) ~80% of BEV and FCEV platform similar; both in future vehicle mix Quick refuel and long range of FCEV is not being ignored China incentivising range and New Energy Vehicle includes BEV and FCEV Truck and bus FCEV applications growing quickly Source: WPIC research 22

23 AGENDA: PLATINUM QUARTERLY Q AND 2018 FORECASTS 1. Introduction Paul Wilson 2. Platinum Quarterly, Fundamentals review Trevor Raymond 3. Fundamental insights Trevor Raymond 4. China update Weibin Deng, Head of China 5. Questions Paul Wilson Trevor Raymond Weibin Deng 23

24 CHINA UPDATE: SIGNIFICANT OPPORTUNITIES BUT WITH CHALLENGES The China opportunity World s largest gold consumption and investment market The second largest asset management market with a growing middle-class population The largest platinum jewellery market with long-standing strong premier brand jewellery Potential demand growth from platinum in largest gasoline car market and high FCEV potential Platinum is small to China, but China is big to Platinum: a small % of gold switching will make a huge impact Challenges Platinum s links to Chinese culture and history far less than gold Underdeveloped platinum hedging and forward pricing Underdeveloped Pt investment products at this stage VAT creates a barrier problem but is not a fatal flaw China Gold Market 2017 Sector Tons M Oz YoY Growth Jewelry % Bars % Coins % Industrial & Others % Total 1, % 24

25 CHINA UPDATE: SUCCESSFUL WPIC DEBUT BUT MUCH MORE TO BE DONE Successful debut via a joint China platinum market seminar with Shanghai Clearing House and NYU Shanghai Seminar supported by SGE and producer, industry and consumer, panelists : > 200 attendees from Pt and financial markets Integrated as part of WPIC PR campaign Market status of WPIC endorsed by SHCH, NYU & SGE Leadership in Pt market being widely recognized in China PR campaign awakening Pt investment awareness Positive feedback from potential partners China PR Campaign on Seminar Live Media Interview M Total Impressions Baidu Search Stat: Pt investment (Mar-Apr18) TV Interview Repost Media 25

26 CHINA UPDATE: WPIC STRATEGIC APPROACH Establish WPIC research credibility /Platinum Market authority Develop our visibility Good relationships with key institutions Identify capable and reputable partners Industrial events Institution visits Clarify market obstacles PR Partners Partners Products Investors Products Investors Pt investment education Grow Pt publicity Target the key population Identify niche markets and low hanging fruit Support product development and marketing PR Projects to meet market needs Pt bars / coins / physical ETF, ETP, hedging contracts Custodial certificates Accumulation plans 26

27 AGENDA: PLATINUM QUARTERLY Q AND 2018 FORECASTS 1. Introduction Paul Wilson, 2. Platinum Quarterly, Fundamentals review Trevor Raymond 3. Fundamental insights Trevor Raymond 4. China update Weibin Deng 5. Questions Paul Wilson, CEO, WPIC Trevor Raymond, Director of Research, WPIC Weibin Deng, Head of China, WPIC 27

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