PLATINUM QUARTERLY PRESENTATION Q1 2018 London 14 th May, 2018
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AGENDA: PLATINUM QUARTERLY Q1 2018 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
AGENDA: PLATINUM QUARTERLY Q1 2018 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
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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: www.platinuminvestment.com 6
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
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
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
Q1 18 DEMAND FLAT. JEWELLERY AND INDUSTRIAL RISES OFFSET WEAK AUTO DEMAND Q1 2017 // Q4 2017 Q1 2018 Automotive 875 865 840 Autocatalyst 835 825 805 Non-road 35 35 35 Jewellery 610 680 640 Automotive down -4% YoY, and -3% QoQ reflecting falling diesel sales Jewellery firm +5% YoY, after strong Q4 Industrial 420 410 435 Chemical 150 135 155 Petroleum 35 25 40 Electrical 40 45 40 Glass 45 25 45 Medical & Biomedical 55 75 55 Other 95 105 100 Industrial rebound as expected Investment 80 95 60 Change in Bars, Coins 30 65 80 Change in ETF Holdings 60 50-10 Change in Stocks Held by Exchanges -10-20 -10 Total Demand 1,985 2,050 1,975 Balance -210 90-125 Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) Total demand flat (-10 koz) as industrial and jewellery growth offset declines 10
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 Q1 2018 vs Q1 2017 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
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
INDUSTRIAL UP AS EXPECTED: 2018 RETURNS TO 2016 LEVELS Industrial demand Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 13
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
2018: SMALLER SURPLUS WITH SUPPLY DOWN AND DEMAND FLAT SUPPLY 2017 2018f YoY, oz YoY, % Refined Production 6,145 6,035-110 -2% South Africa 4,385 4,355-30 -1% Zimbabwe 480 455-25 -5% North America 365 375 10 3% Russia 725 660-65 -9% Other 190 185-5 -3% Inc (-)/Dec (+) in Producer Inventory +30-20 -50-167% Total Mining Supply 6,175 6,015-160 -3% Broad-based decline in mine supply continues Recycling 1,905 1,960 55 3% Autocatalyst 1,340 1,405 65 5% Jewellery 560 550-10 -2% Industrial 5 5 0 0% Total Supply 8,080 7,975-105 -1% DEMAND Automotive 3,390 3,285-105 -3% Jewellery 2,460 2,510 50 2% Industrial 1,655 1,750 95 6% Investment 260 250-10 -4% Total Demand 7,765 7,795 30 0% Balance 315 180 - - Automotive decline reflecting loss of diesel sales but strong Industrial and recovering Jewellery Market surplus in 2018 135 koz lower than in 2017 Above Ground Stocks 2,220 2,400 180 8% Source: WPIC Platinum Quarterly Q1 2018, SFA (Oxford) 15
AGENDA: PLATINUM QUARTERLY Q1 2018 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
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
INVESTMENT DEMAND POTENTIAL: PLATINUM AS GOOD AS GOLD Platinum premium / discount to gold (US$/oz) Platinum s premium to gold declined partly due to increased demand for gold-containing indices. Gold always fully priced but platinum offers undervalued entry point, similar portfolio benefits and upside potential Source: Bloomberg, WPIC research. Based on weekly returns. 18
DIESEL CAR SALES FALL FURTHER BUT AUTOMAKERS SPEAK UP TO PROMOTE DIESEL Automakers now backing their diesel cars: if they have clean on-road diesel Automakers with clean diesels It will not be possible to meet the EU s strict CO 2 targets for 2020 without diesel cars Future mobility will definitely depend on diesels as well Automakers catching up We have to lessen our reliance on diesel substantially The cost of making diesel reach the new standards is going to become prohibitive Further improving the diesel engine is better than banning it. +ve automaker diesel statements are increasing watch and wait continues on share & loadings NO x crisis not resolved but cost of alternatives (BEV / Hybrid) is high (but not publicly shown) Diesel NO x control is more cost effective and predictable than increasing slow BEV & hybrid sales Source: WPIC research 19
INCREASED PALLADIUM SUPPLY RISK MAKES SWITCHING TO PLATINUM MORE LIKELY Palladium remains a by-product with price set by value-in-use / best alternative cost Palladium is a cost-effective alternative to platinum in gasoline engine emissions control Platinum price strength should also drive the palladium price Increased palladium supply concerns on global trade tensions Platinum availability risk key but ($/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
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) 7.5 12.5 17.5 22.5 27.5 1.5% 0.63 0.76 0.89 1.01 1.14 3.0% 1.27 1.52 1.77 2.03 2.28 BEV success (@30% LT) drove $1bn Lithium ETF Platinum in FCEV (@6% LT) = 3.5moz p/a 4.5% 1.90 2.28 2.66 3.04 3.42 6.0% 2.53 3.04 3.55 4.05 4.56 7.5% 3.17 3.80 4.43 5.06 5.70 Source: WPIC research 21
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
AGENDA: PLATINUM QUARTERLY Q1 2018 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
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 696.50 22.40 10.35% Bars 276.39 8.89 7.28% Coins 26.00 0.84-16.64% Industrial & Others 90.18 2.90 19.63% Total 1,089.07 35.02 9.41% 24
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 7 1 67 120M Total Impressions Baidu Search Stat: Pt investment (Mar-Apr18) TV Interview Repost Media 25
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
AGENDA: PLATINUM QUARTERLY Q1 2018 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