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Global chip shortage weight on platinum

Ceteris Paribus: By Eben Mabunda

THE prospects for the global automobile industry continue to look gloomy as the unending semi-conductor deficiency that has gripped the industry for more than a year now shows no signs of rescinding.

Platinum futures have been wobbly in the second half of 2021 on a subdued dollar, but persisted near levels not realized since November 2020, as worries over demand from the automotive industry continued. The semi-conductor chip shortage that began in the first quarter of 2021 is expected to last until late next year, hitting the auto industry where the metal is used in catalytic converters. General Motors revised higher the impact of the chip shortage in car output, stating that 1H 2021 will see less 200,000 vehicles leaving assembly lines than expected, compared to the loss of 100,000 units forecasted in August. The North American carmaker’s announcement followed similar statements by Asian and European peers, who have recently cut output and sales forecasts due supply issues and chip shortages, made worse by the resurgence of COVID-19 cases in Asia. Among the latest nay-sayers were Goldman Sachs, who cut their 2021 production estimate for the industry this Tuesday, but who also said the bad news may already be priced in, given the declines in the Stoxx 600 Automobiles & Parts Index the past 3 months.

WPIC Q2 report

In its second-quarter and full-year 2021 outlook report published this month, the World Platinum Investment Council -WPIC, indicated that the roughly 8 million ounces a year market will be oversupplied by 190,000 ounces in 2021 reversing  a forecasted a shortfall of 158,000 ounces in 2021, which would have marked a third consecutive year of deficits. The outturn is on the back of stand-out rises in automotive and industrial segments, the combination of South African mines operating at 97% of planned capacity, and the faster-than-expected processing of material built up during plant outages in 2020. Global platinum demand was up sharply against Q2’20 increasing 23% (+352 Koz) year-on-year to 1,907 Koz, with 2021 forecast to increase by 1% (+59 Koz) over 2020 to 7,753 Koz.

Platinum price changes

According to the Equity Axis Editor, Raynold Mhotseka:

“Platinum prices were well supported through the second quarter this year, averaging $1,183/oz, up 49% year-on-year, and the highest quarterly average since Q1 2015, benefitting from a notably strong recovery in automotive and industrial demand during the first half of the year. However, since the end of Q2 2021, the platinum price has weakened, trading below $975/oz on negative investor sentiment towards industrial metals.”

Zim key developments

Zimbabwe is home to the world’s second largest Platinum Group Metal deposits and is also the third largest platinum producer globally, behind South Africa and Russia respectively. Zimplats, a subsidiary of one of the world’s leading producers of platinum, Impala Platinum (Implats) reported an astral financial performance for the year ended 30 June 2021, which saw its revenue increase to US$1.4 billion, up 56% from US$868.9 million recorded in fiscal 2020. The firm maintained production levels with milled volumes increasing by 1% to 6.82 million tonnes comparable to 6.75 million tonnes recorded in 2020. Zimplats made significant progress on the expansion projects during the period under review ballooning its capital expenditure by 43% to US$159 million against US$111 million last year. Tharisa, a new player in Zimbabwe’s PGMs space this September indicated readiness to present a development proposal for a platinum group metals (PGM) mine in Zimbabwe before the year-end after completing technical studies recently. The firm has a 26.8% stake in Karo Platinum which was in March this year awarded the mining right over a 90 million ounce PGM resource in Zimbabwe’s Selous PGM-bearing region. Previous estimates suggested Karo’s mineral holdings of Selous could support a 1.4 million oz a year PGM mine, and a refinery.

  • Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.net.

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