PLATINUM QUARTERLY PRESENTATION Q2 2018 - London 6th September, 2018 - World ...
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PLATINUM QUARTERLY PRESENTATION Q2 2018 London 6th September, 2018
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IMPORTANT NOTICE AND DISCLAIMER: This publication is general and solely for educational purposes. The publisher, The World Platinum Investment Council,
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2
AGENDA: PLATINUM QUARTERLY
Q2 2018 AND 2018 REVISED FORECAST
1. Introduction
Paul Wilson, CEO
2. Platinum Quarterly, Fundamentals review
Trevor Raymond
3. Focus on fundamental drivers
Trevor Raymond
4. Questions
Paul Wilson
Trevor Raymond
3
AGENDA: PLATINUM QUARTERLY
Q2 2018 AND 2018 REVISED FORECAST
1. Introduction
Paul Wilson
2. Platinum Quarterly, Fundamentals review
• Q2’18
• 2018f revision
Trevor Raymond, Director of Research
3. Focus on fundamental drivers
Trevor Raymond
4. Questions
Paul Wilson
Trevor Raymond
4
Q2 2018 SUPPLY: STRONG Q2 AS EXPECTED
MINING AND TOTAL SUPPLY FLAT YOY
SUPPLY Q2 2017 // Q1 2018 Q2 2018 • Seasonally strong Q2 as expected
Refined Production 1,555 1,305 1,575
South Africa 1,090 905 1,125 • Total mining supply up 1% (10koz) YoY
Zimbabwe 125 115 110 inclusive of 65 koz inventory reduction
North America 85 90 85
Russia 205 145 205
Other 50 50 50 • Recycling flat YoY
Inc(-)/Dec(+) in Producer Inventory +75 -10 +65
Total Mining Supply 1,630 1,295 1,640
• Annual total supply still trending lower
Recycling 480 455 480 – H1’18 just below H1’17
Autocatalyst 330 330 345
Jewellery 150 125 135
Industrial 0 0 0
Total Supply 2,110 1,750 2,120
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 5
MINING SUPPLY: DECLINING TREND INTACT, DESPITE
TEMPORARY QUARTERLY PICKUP
Total mining supply and refined production Temporary factors raised mine production
in Q2 2018
• S.A. production up on: a shaft in ramp-
up phase, mining of high grade area at
a major operation and improved
concentrator performance
• S.A. shaft closures in 2017 reduced
supply by 25koz in Q2’18
• Net 65 koz reduction in inventory lifted
total mining supply 1% YoY
Refined production Total mining supply
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 6
RECYCLING: QUARTERLY INCREASE BUT FLAT ANNUAL
LEVEL EXPECTED
Autocat and jewellery recycling
• Q2 recycling flat YoY
600
Autocat Jewellery
• Autocatalyst recycling up 15 koz QoQ
500
(+5%), driven by high scrap steel price
400
• Jewellery scrap up 10 koz QoQ (+8%),
koz
300 but low platinum price continues to
disincentivise recycling
200
• Full year recycling marginally higher as
100
growth in autocatalyst recycling to be
0 offset by lower jewellery recycling
Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Q1'18
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 7
Q2 2018 DEMAND: AUTO & INVESTMENT DOWN
JEWELLERY FLAT, INDUSTRIAL UP V Q2 2017
DEMAND Q2'17 // Q1'18 Q2'18
Automotive 840 805 800 • Automotive demand down 35koz YoY
Autocatalyst 805 765 770 as W. Europe diesel sales continue to
Non-road 35 35 40
fall
Jewellery 590 605 590
• Jewellery flat YoY
Industrial 415 465 445
Chemical 140 145 140
Petroleum 15 40 40 • Industrial demand up 30 koz YoY
Electrical 45 55 45
Glass 50 70 45
Medical & Biomedical 70 55 70 • Bar and coin demand solid in Q2 but
Other 95 100 105 offset by ETF redemptions of 125 koz
Investment 100 50 -55
Change in Bars, Coins 70 75 70 • Total demand down 145 koz QoQ with
Change in ETF Holdings 30 -15 -125
340 koz surplus in Q2’18
Change in Stocks Held by Exchanges 0 -10 0
Total Demand 1,945 1,925 1,780
Balance 165 -175 340
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 8Q2 2018 DEMAND: AUTOCATALYST DEMAND DOWN ON
FALLING EU DIESEL SALES
Autocatalyst demand, quarterly
• Autocatalyst demand fell to 800 koz in
Q2’18 from 840 koz in Q2’17
• Third consecutive Q2 and H2 declines
as fall in W. Europe diesel sales
continues
• Increasingly severe financial impact on
automakers from falling diesel sales
Autocatalyst demand, half-yearly
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 9Q2 2018 DEMAND: JEWELLERY WEAKER IN CHINA
MODEST GROWTH IN ALL OTHER REGIONS
Jewellery demand koz
• Jewellery demand was 590 koz in
Q2’18, flat YoY and down 3% QoQ
• Gains in India, Europe and North
America offset weakness in China
• Mainland China (all) retail jewellery
sales dropped 10% YoY in Q2’18
• Indian growth small in Q2’18 as it
included an inauspicious period for
weddings (Adhik Maas)
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 10Q2 2018 DEMAND: INDUSTRIAL DEMAND HIGHER ON
NET GROWTH IN PETROLEUM AND OTHER V Q2 2017
Industrial demand koz
• Net platinum demand was 445 koz in
Q2’18, up 30 koz (+7%) YoY
• New metal up on refining capacity
expansion in Asia and RoW; reduced
recycling supply from 2017 closures in
Japan
• Rising demand for fuel cells (Japan)
and automotive sensors (China and
RoW) increased platinum consumption
in other end-uses
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 11Q2 2018 DEMAND: INVESTMENT DOWN
JAPANESE BAR DEMAND STABLE, ETF OUTFLOWS
Investment demand by category
400 • Platinum investment demand net
negative in Q2
300 Net
200 • Bar & coin demand strong at 70 koz;
additional 10 koz US Mint release
100
koz
0 • ETFs down 125 koz in Q2’18; net sales
-100 in all regions
-200 • Exchange stocks were flat despite
-300 reduced long positioning
-400
Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Q1'18
Bar and coin ETFs Exchange stocks
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 122018 FORECAST: SIMILAR SURPLUS TO PREVIOUS
FORECAST WITH SUPPLY AND DEMAND DOWN
SUPPLY 2017 2018f YoY, oz YoY, %
Refined Production 6,140 6,025 -115 -2% • Total mining supply to fall by 3% in
South Africa 4,385 4,335 -50 -1%
Zimbabwe 480 460 -20 -4% 2018: S.A. supply down 1% to 4,335
North America 365 365 0 0%
Russia 720 680 -40 -6%
koz as 2017 loss-making production
Other 190 185 -5 -3% closures reduce supply by 105 koz
Inc (-)/Dec (+) in Producer Inventory +30 -10 -40 -133%
Total Mining Supply 6,170 6,015 -155 -3%
• Total supply down 2% on flat recycling
Recycling 1,890 1,895 5 0%
Autocatalyst 1,325 1,385 60 5% as +5% autocat offset by -10%
Jewellery 560 505 -55 -10% jewellery
Industrial 5 5 0 0%
Total Supply 8,060 7,910 -150 -2%
• Total demand to fall 2% on lower
DEMAND
Automotive 3,340 3,130 -210 -6% automotive, jewellery and investment
Jewellery 2,460 2,445 -15 -1%
Industrial 1,700 1,790 90 5%
Investment 265 250 -15 -6% • Surplus in 2018 to be same as in 2017
Total Demand 7,765 7,615 -150 -2% at 295koz or 3.9% of total demand
Balance 295 295 - -
Above Ground Stocks 2,200 2,495 295 13%
Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 13AGENDA: PLATINUM QUARTERLY
Q2 2018 AND 2018 REVISED FORECAST
1. Introduction
Paul Wilson
2. Platinum Quarterly, Fundamentals review
Trevor Raymond
3. Focus on fundamental drivers
• Price and gold
• Demand drivers: Industrial & Auto
Trevor Raymond, Director of Research
4. Questions
Paul Wilson
Trevor Raymond
14SHORT TERM PLATINUM TRADING IGNORES
SUPPLY/DEMAND BUT TRACKS GOLD
Platinum and gold - price tracking examples Gold’s impact on platinum stays high as
platinum supply/demand largely ignored
• Platinum’s high correlation with gold
since 2011 encourages a predictable
add-on to many gold trades
• Platinum argued as less liquid than gold;
trusted ‘geared’ add-on to gold trades
• Platinum price falls, unrelated to platinum
supply/demand, discourages investment
in platinum
• Platinum offers ‘gold-like’ diversifier
(driven by gold’s macro drivers) with re-
rating upside
Source: Bloomberg, WPIC research 15INCREASING ADOPTION OF ALL FUEL CELLS IS
ENHANCING HYDROGEN INFRASTRUCTURE
Fuel Cell, Solar PV & Wind Turbine annual power generation (MW)
“Wind in 1994 and
Solar in 2002 meet
Fuel Cells in 2017” *
Fuel cell growth on same ‘mass adoption’ trajectory as early wind and solar
• Heavy duty fuel cell trucks and buses, typically depot-based (drayage, city fleets etc.), to
drive H2 refilling rollout and short-term platinum demand growth
• Significant focus in Asia – China plan will double global H2 refuelling points to over 600
Source: Electron Communications, www.fuelcellindustryreview.com, *Matthew Klippenstein 16WPIC INCREASING ENGAGEMENT AND COVERAGE TO
DRIVE RETAIL INVESTMENT DEMAND OPPORTUNITY
WPIC increasing retail awareness & ownership
• Replicating high retail ownership successes in Japan
• WPIC Product partnerships increase product availability and distribution channels
Recent topics
• Increased global access to healthcare drives platinum medical demand
• Platinum’s long standing premier status – now at the pinnacle of global sport
• Royal Mint’s first platinum bullion coins – sales of 30koz in 12 months to March 2018
Awareness of new and long-standing uses Premier metal and investment asset
New more flexible Pt coil treating aneurysms Team USA win inaugural Athletics World Cup
Source: Johnson Matthey 17PUBLISHED SUPPLY DEMAND DATA SOMETIMES
EXCLUDES PROPRIETARY DATA
Hard Disk Drive makers; PC and Cloud NOx emissions participants: Auto and component OEMs
Johnson Matthey
Seagate
Daimler BMW VW BASF
Western Digital
Fiat Chrysler Renault Nissan Umicore
Toshiba
Bosch
Very large participants, high-tech IP and highly competitive – confidential strategy
• Competitive IP attached to platinum usage in many applications
• PGMs in automotive emissions control – technically complex with low disclosure
• VW and diesel emissions scandal increased reputation risk
• Low NOx strategies – platinum loadings and planned number of diesel cars on the road
• Platinum substitution for palladium in gasoline
18AUTOMAKER DIESEL AND NOX STRATEGIES NOT PUBLIC
HIGHER PLATINUM LOADINGS PART OF THE SOLUTION
Platinum loadings not public yet More platinum is part of very low on-road NOx
• The choice of paying fleet CO2 fines or
keeping ‘clean-on-road’ diesels has
already been made
• Reducing NOx from > 700mg/km to
below 100 mg/km requires multiple
• Higher platinum loading in Lean NOx Trap
changes – platinum’s inclusion is highly
LNT (or NOx Storage Catalyst, NSC)
likely
• Higher platinum loading in Diesel Oxidation
Catalyst (DOC) to increase effectiveness of
NOx reaction with urea
Source: WPIC research, Umicore. Notes LNT Lean NOx trap (or NOx Storage Catalyst (NSC), DPF (Diesel Particulate Filter – can be catalysed, SCR Selective Catalytic Reduction 19SIGNIFICANT PLATINUM DEMAND GROWTH POTENTIAL
PT REPLACING PD IN 20% OF GASOLINE > 900KOZ/YEAR
2013 JM study: Gasoline Pt:Pd ratio is 1:1 Increased palladium supply risk; switching
to platinum in gasoline more likely
• Over 90% of palladium mined as by-product.
Price = value-in-use of best alternative (Pt)
• Sustained palladium deficits and rising price
increase availability concerns
• 2013 Johnson Matthey study on ‘in-service’
Euro 5 gasoline catalyst confirmed:
Switching scenarios Pt replacing Pd (koz)
• Substitution ratio of 1:1
• No performance risk, no re-tooling
• No additional certification cost
Source: Top: Johnson Matthey: A Study of Platinum Group Metals in Three-way Autocatalysts, Platinum Metals Review, J Cooper & J Beecham, 2013,57,(4), 281-288, © 2013 Johnson 20
Matthey, extracts from table V. http://dx.doi.org/10.1595/147106713X671457. Bottom: BloombergAGENDA: PLATINUM QUARTERLY
Q2 2018 AND 2018 REVISED FORECAST
1. Introduction
Paul Wilson
2. Platinum Quarterly, Fundamentals review
Trevor Raymond
3. Focus on fundamental drivers
Trevor Raymond
4. Questions
Paul Wilson, CEO
Trevor Raymond, Director of Research
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