Platinum Supply Deficits 'Here to Stay'
Friday, 7/25/2025 10:46
Price inelasticity means mining won't surge...
The RISING PLATINUM PRICE is unlikely to dampen demand or stimulate additional supply, meaning that forecast market shortfalls are here to stay,
says the mining-industry backed World Platinum Investment Council.
'Inelastic' is a term used by economists to describe a situation where a change in price has a relatively small impact on the quantity demanded of a good or service.
In other words, consumers will continue to purchase roughly the same amount even if the price increases or decreases.
In contrast, an elastic relationship means that changes in price will result in a significant increase or decrease in the supply or demand of a good or service.
Platinum prices have recently reached a ten-year high, exceeding $1400. This follows a prolonged period when platinum's price was stuck at a range which varied from around $900-1100 per Troy ounce.
Yet, because the relationship between the price of platinum and its supply or demand is largely price inelastic, the platinum price rally is unlikely to dampen demand or stimulate miners to produce additional metal, meaning that, in the platinum market, supply will continue to lag demand, resulting in a structural deficit.
To put this in context, the platinum market is
expected to record its third successive shortfall this year, at 966,000 ounces. This follows deficits of 992koz and 896koz in 2024 and 2023, respectively.
Moreover, looking at the WPIC two-to-five-year forecast through to 2029, deficits are forecast to occur every year.
Consecutive supply deficits are expected to see above-ground stocks run out by 2029. Meanwhile, platinum supply remains challenged, both in terms of primary mining and secondary recycling supply.
The demand outlook is robust. Demand for hybrid vehicles and slower-than-expected battery electric vehicle adoption is supportive of platinum automotive use, while strong demand growth in both investment and jewellery is being experienced in China.
Data supports the view that both platinum supply and platinum demand are largely price inelastic in the medium term.
Chart 1 illustrates that historical movements in the platinum price did not trigger an immediate change in supply or demand, with responses often lagging by several years.
On the supply side, platinum's inelasticity is structural. As Chart 2 demonstrates, even sharp price signals take years to translate into new supply. Most mines require eight to nine years to reach full production capacity, and investment decisions must take into account not only platinum’s price potential, but also that of the overall platinum group metals basket plus base-metal by-products.
Demand is unlikely to fall in the short-term, despite the price rally making platinum more expensive for industrial end users.
Across the automotive, jewellery and industrial sectors, platinum consumption has historically shown limited volatility in relation to short-term price movements. Between 2003 and 2008, for instance, automotive demand rose by over 25% even as prices climbed from around $600 to $2000 per ounce, only falling after the global financial crisis precipitated a broader widespread commodity downturn.
The
industrial uses of platinum have shown some delayed inverse demand relationship with price, but volumes tend to adjust over multiple years.
Jewellery is structurally more elastic, yet platinum's relatively more attractive affordability versus gold is now emerging as a counterforce. The gold-to-platinum price ratio reached 3.5x in May 2025, its highest level since 2015, prompting some Chinese fabricators to switch to platinum.
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