World platinum demand to spur Zim revenues

Zimbabwe will be smiling all the way to the bank as it emerged that platinum demand in 2023 might reach a record high as China, Egypt and India capacity expansion programmes will gobble most of the platinum mined in the world.

As a country that depends more on its raw minerals for revenue, the news is welcome as it results in more revenue inflows.

This year is forecast to be the second strongest year for industrial platinum demand on record, despite the challenging world economic conditions that are prevailing.

Demand is expected to climb 10 percent to 2,316 kilo ounces (koz), with a notable increase in demand from the glass industry.

According to the World Platinum Investment Council (WIPC); “The robustness of the 2023 industrial platinum demand forecast is rooted in strong and diversified foundations, which leave it well insulated from the nearer term recessionary outlook.”

To put this in context, 2021 was a record year for industrial platinum demand, reaching 2,450 koz and this was primarily due to significant glass manufacturing capacity expansions, which were not repeated to the same extent in 2022, resulting in a 14 percent reduction in demand last year to 2,110 koz, when compared to the prior year.

Economist Professor Tony Hawkins views the demand as a reason to push for production and cash in on the price.

“It needs companies that are always ready and those that have buffer stocks such that they can quickly react to the price surge due to demand. For the country, this will help us on the trade balance as we get to export the same quantity for more money,” he said.

According to Zimbabwe Statistics Agency (ZIMSTAT) for the year to November 2022 the country made US$186,9 million from platinum, gaining 12 percent from US$166,3 million realised in the same period in 2021.

In the current year, 2023, WIPC said much of the predicted growth in industrial demand for platinum is due to capacity expansions in the glass industry, which have already been committed, meaning they are likely to go ahead irrespective of economic conditions, so providing a high degree of certainty.

Driven by anticipated growth in capacity expansions in China, as well as fibreglass plant projects in Egypt, platinum glass demand is expected to jump by 52 percent to 481 koz in 2023 which is more than double the level in pre-pandemic 2019.

“This reflects the growing role of glass fibre reinforced materials in reducing carbon emissions, in applications such as vehicle light-weighting and wind power,” said WIPC.

In other industrial demand sectors, continued strong chemical, medical and other demand are also likely to more than offset weaker outlooks for the petroleum and electrical sub-sectors this year.

Economist Dr Prosper Chitambara said; “A rise in demand coincides with a reported platinum production increase to approximately 502 koz for our country in 2023 and this will no doubt be a boost for the country’s finances and it will probably narrow the trade deficit.”

The estimated production represents a 5 percent growth in production from the anticipated 453 koz in 2022 which was down from the 478 koz produced in 2021.

Economist Gladys Shumbabiri said; “Zimbabwe is envisioning a US$12 billion mining industry by end of 2023 and of the US$12 billion, gold, platinum, and diamonds will contribute US$4 billion, US$3 billion and US$1 billion respectively.

This becomes good news for the sector as it will drive closer to its target.”

In the chemical sector, demand is forecast to increase by 6 percent to 666 koz in 2023, albeit remaining similar to the five-year average.

Following a turbulent three-year period from 2020 to 2022, the nitric acid industry is expected to recover, becoming the largest contributor to overall growth in chemical platinum offtake.

Meanwhile, platinum demand from the petroleum industry is projected to decline in 2023 by 10 percent to 180 koz, with the International Energy Agency downgrading expectations for oil demand due to the slowing global economy.

According to WIPC, “Medical demand is expected to resume its growth trend as the impact of the pandemic recedes, with forecasts showing a 3 percent increase to 283 koz, surpassing the 2019 pre-pandemic level for the first time.”

Emerging markets, notably China
and India, will see the greatest increase in demand due to their high-growth medical industries.-ebusinessweekly