Platinum Quarterly Q4 2017 Presentation · PLATINUM QUARTERLY PRESENTATION Q4 2017 London 8th March, 2018. COPYRIGHT AND DISCLAIMER IMPORTANT NOTICE AND DISCLAIMER: This publication

PLATINUM QUARTERLY PRESENTATION

Q4 2017

London

8th March, 2018

COPYRIGHT AND DISCLAIMER

IMPORTANT NOTICE AND DISCLAIMER: This publication is general and solely for educational purposes. The publisher, The World Platinum Investment Council,

has been formed by the world’s leading platinum producers to develop the market for platinum investment demand. Its mission is to stimulate investor demand for

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2

AGENDA: PLATINUM QUARTERLY

2017, Q4 2017 AND 2018 FORECAST

1. Introduction

Paul Wilson, CEO, WPIC

2. Platinum Quarterly, Fundamentals review

Trevor Raymond, Director of Research, WPIC

3. Fundamental insights

Trevor Raymond

4. Questions

Paul Wilson

Trevor Raymond

3


2017, Q4 2017 AND 2018 FORECAST

1. Introduction

Paul Wilson


Supply, demand and balance

• 2017

• Q4’17

• 2018 forecast



Trevor Raymond

4. Questions

Paul Wilson

Trevor Raymond

4

WPIC RESEARCH IS MIFID II “COMPLIANT”

5

WPIC Research MiFID II Status

The World Platinum Investment Council (WPIC) has undertaken an internal and external review of its

content and services for MiFID II. As a result WPIC highlights the following to the recipients of its

research services, and their Compliance/Legal departments:

WPIC research content falls clearly within the Minor Non-Monetary Benefit Category, and can continue to be

consumed by all asset managers free of charge. WPIC research can be freely shared across investment

organisations.

1. WPIC does not conduct any financial instrument execution business. WPIC does not have any market

making, sales trading, trading or share dealing activity. (No possible inducement).

2. WPIC content is disseminated widely and made available to all interested parties through a range of different

channels, therefore qualifying as a “Minor Non-Monetary Benefit” under MiFID II (ESMA/FCA/AMF). WPIC

research is made freely available through the WPIC website. WPIC does not have any permissioning

requirements on research aggregation platforms.

3. WPIC does not, and will not seek, any payment from consumers of our research services. WPIC makes it

clear to institutional investors that it does not seek payment from them for our freely available content.

More detailed information is available on the WPIC website: http://www.platinuminvestment.com/investment-

research/mifid-ii

http://www.platinuminvestment.com/investment-research/mifid-ii

SUPPLY 2016 2017 YoY, oz YoY, %

Refined Production 6,035 6,075 40 1%

South Africa 4,255 4,370 115 3%

Zimbabwe 490 445 -45 -9%

North America 395 365 -30 -8%

Russia 715 715 0 0%

Other 180 180 0 0%

Inc (-)/Dec (+) in Producer Inventory +30 +35 5 17%

Total Mining Supply 6,065 6,110 45 1%

Recycling 1,855 1,905 50 3%

Autocatalyst 1,225 1,340 115 9%

Jewellery 625 560 -65 -10%

Industrial 5 5 0 0%

Total Supply 7,920 8,015 95 1%

DEMAND

Automotive 3,490 3,395 -95 -3%

Jewellery 2,505 2,460 -45 -2%

Industrial 1,790 1,650 -140 -8%

Investment 535 260 -275 -51%

Total Demand 8,320 7,765 -555 -7%

Balance -400 250 - -

Above Ground Stocks 1,905 2,155 250 13%

2017: MARKET IN SURPLUS

6

• Strong S.A. mine supply, autocatalyst

recycling offset by weakness

elsewhere – flattish supply

• Moderate decline in automotive

demand – headwinds overestimated

• Lower jewellery demand due to

rebasing of India

• Investment demand down YoY; as

very strong Japan bar buying not

repeated

Source: WPIC Platinum Quarterly Q4 2017, SFA (Oxford)

SUPPLY Q4 2016 // Q3 2017 Q4 2017

Refined Production 1,490 1,570 1,540

South Africa 1,065 1,140 1,120

Zimbabwe 120 100 105

North America 85 95 90

Russia 170 185 185

Other 50 45 45

Inc(-)/Dec(+) in Producer Inventory -75 -10 +30

Total Mining Supply 1,415 1,560 1,570

Recycling 470 480 520

Autocatalyst 290 330 380

Jewellery 180 150 140

Industrial 0 0 0

Total Supply 1,885 2,040 2,090


• Total supply +205 koz YoY

• Mine supply +155 koz YoY, given S.A.

outperformance and inventory release

• High prices increased autocatalyst

recycling

7

Q4 2017 SUPPLY: STRONG RECYCLING, MINING

SUPPORTED BY INVENTORY RELEASE

600

800

1,000

1,200

1,400

1,600

1,800

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

koz

MINING SUPPLY: INVENTORY DRAWDOWN BOLSTERS

SUPPLY AGAIN


Total mining supply and refined production

Refined production Total mining supply

8

• Refined production -2% QoQ but +3%

YoY

• S.A. outperformed on lower safety

stoppages, operational improvements

• Further 30koz inventory drawdown,

though inventory now at “normal” levels

0

1,000

2,000

3,000

4,000

5,000

1985 1990 1995 2000 2005 2010 2015

Platinum Palladium Rhodium

0

500

1,000

1,500

2,000

1985 1990 1995 2000 2005 2010 2015

Recycling 'basket' USD/oz Platinum USD/oz

0

100

200

300

400

500

600

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

koz

RECYCLING SUPPLY: SURPRISE INCREASE IN

AUTOCATALYST RECYCLING

Source: WPIC Platinum Quarterly Q4 2017, SFA (Oxford). Johnson Matthey (PGM autocatalyst recycling volumes), Kitco, macrotrends. Recycling ‘basket’ calculated using the weighted average of

autocatalyst recycling volumes and prices.

Autocatalyst and jewellery recycling

Autocatalyst Jewellery

9

• Autocatalyst recycling +50 koz

• High palladium, rhodium (and scrap

steel) prices leading to increased

collection rates and processing of spent

autocatalysts

• Jewellery recycling -10 koz QoQ

Autocatalyst PGM recycling (koz) Autocatalyst PGM ‘basket’

DEMAND Q4 2016 // Q3 2017 Q4 2017

Automotive 885 810 865

Autocatalyst 850 770 830

Non-road 35 35 35

Jewellery 700 585 675

Industrial 410 415 405

Chemical 130 165 135

Petroleum 55 25 25

Electrical 40 40 40

Glass 5 50 20

Medical & Biomedical 75 45 75

Other 105 90 110

Investment 225 -10 95

Change in Bars, Coins 115 45 65

Change in ETF Holdings 115 -40 50

Change in Stocks Held by Exchanges -5 -15 -20

Total Demand 2,220 1,800 2,040

Balance -335 240 50

Source: WPIC Platinum Quarterly Q4 2017, SFA (Oxford) 10

Q4 2017 DEMAND: FLAT AUTO & INDUSTRIAL

• Automotive demand -2% YoY, but

recovering from a seasonally weak Q3

• Jewellery demand +15% QoQ, helped

by China resurgence and restocking

• Investment demand +105 koz QoQ

600

650

700

750

800

850

900

950

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

koz

Q4 2017 DEMAND: AUTOCATALYST DEMAND REBOUNDS

SEASONALLY

Source: WPIC Platinum Quarterly Q4 2017, 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

Change in European cars Q4 2017 vs Q3 2017

Autocatalyst demand, quarterly

11

• Automotive demand down 20 koz YoY

• Falling European diesel share

continues to be a headwind for platinum

demand

• Diesel share not expected to continue

to fall as quickly

3.00 3.05 3.10 3.15 3.20 3.25 3.30

New cars - Q4-17

Increase from Other

Increase from PHEVs

Increase from BEVs

Decrease from HEVs / mild hybrids

Increase from Gasoline

Decrease from Diesel

New cars - Q3-17

European* cars (m)

-20%

-15%

-10%

-5%

0%

5%

10%

-200

-150

-100

-50

0

50

100

Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

YoY

gro

wth

, %

koz,

YoY

gro

wth

200

300

400

500

600

700

800

900

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

koz

Q4 2017 DEMAND: JEWELLERY DEMAND REBOUNDS

HK tourists

Gold/Silver jwl sales

Pt jwl demand

Jewellery demand growth and economic drivers

12

• China – sequential increase but still

underperforming gold (Q4 2017 gold

jewellery demand +6% YoY)

• India – double-digit growth in platinum

outperforms gold (Q4 2017 gold

jewellery demand +4% YoY)

Jewellery demand

Source: Hong Kong Tourism Board, National Bureau of Statistics of China, WPIC Platinum Quarterly Q4 2017, SFA (Oxford), World Gold Council – Q4 2017 Gold Demand Trends

• Net demand -10 koz QoQ

• Chemical demand -30 koz QoQ

• Positive momentum in Medical (+30

koz QoQ) and Other (includes fuel

cells, +20 koz QoQ)

0

100

200

300

400

500

600

Q3'14 Q3'15 Q3'16 Q3'17

koz

Chemical

Petroleum

Electrical

Glass

Medical

Other

Q4 2017 DEMAND: INDUSTRIAL DEMAND FLAT


Industrial demand

Industrial demand - split

100

125

150

175

200

200

250

300

350

400

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

Me

dic

al +

'Oth

er', ko

z

All

oth

er in

du

str

ial, k

oz

All other Medical + 'Other'

-400

-300

-200

-100

0

100

200

300

400

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17

koz

Net

Q4 2017 DEMAND: ETFs, BAR/COIN DEMAND POSITIVE


Investment demand by category

Bar and coin ETFs Exchange stocks

14

• Japan bar buying stimulated as prices

fell to ¥3,400/g

• 105 koz QoQ increase in ETF buying

activity

• US retail market potential

• New low-cost ETF launched in

the US – January 2018

• Multiple opportunities in China

• Shanghai office developing

investor allocation and product

partners

• Multi-channel investor

outreach in Japan

15

MARKET DEVELOPMENT – INCREASING PRODUCT

CHOICE & APPEAL TO WIDER RANGE OF INVESTORS

SUPPLY 2017 2018f YoY, oz YoY, %

Refined Production 6,075 5,850 -225 -4%

South Africa 4,370 4,175 -195 -4%

Zimbabwe 445 450 5 1%

North America 365 370 5 1%

Russia 715 685 -30 -4%

Other 180 170 -10 -6%

Inc (-)/Dec (+) in Producer Inventory +35 +0 -35 -100%

Total Mining Supply 6,110 5,850 -260 -4%

Recycling 1,905 1,965 60 3%

Autocatalyst 1,340 1,405 65 5%

Jewellery 560 555 -5 -1%

Industrial 5 5 0 0%

Total Supply 8,015 7,815 -200 -2%

DEMAND

Automotive 3,395 3,285 -110 -3%

Jewellery 2,460 2,505 45 2%

Industrial 1,650 1,750 100 6%

Investment 260 250 -10 -4%

Total Demand 7,765 7,790 25 0%

Balance 250 25 - -

Above Ground Stocks 2,155 2,180 25 1%


2018 FORECAST: SUPPLY FALLING, DEMAND GROWING,

MARKET IN BALANCE

• Broad-based decline in mine supply

expected

• Automotive decline to be offset by

strong Industrial and recovering

Jewellery

• Market moving from a surplus in 2017

to balanced in 2018


2017, Q4 2017 AND 2018 FORECAST

1. Introduction

Paul Wilson


Trevor Raymond



4. Questions

Paul Wilson

Trevor Raymond

17

SOUTH AFRICA – POLITICAL BACKDROP IMPROVING

Source: Bloomberg, WPIC Research

USDZAR (inverted)

18

• Several positive political changes (new

S.A. President, new Minister of Mineral

Resources)

• S.A. producers will likely have to adapt

to a strong ZAR environment

• Usually, positive correlation between

strength of ZAR and USD platinum

price

Platinum (USD/oz) & USDZAR

2

4

6

8

10

12

14

16400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2005 2010 2015

Platinum ZAR (inverted - rhs)

10

11

12

13

14

15

16

17

18

2015 2016 2017 2018

18th Dec '17 -New head of ruling party elected

14th Feb '18 - Old president resigns, new president appointed

9th Dec '15 -President fires finance minister

3rd Apr '17 - S&Pcuts S.A's credit rating to 'junk'

JEWELLERY – CHINA REVIVING, INDIA REBASED


0

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015 2016 2017 2018

Jewellery demand Difference vs Nov-17

Jewellery demand (koz)

• China jewellery market improving

• India jewellery demand growing

strongly, PGI partners +46% in Q4

2017

• Despite downward revision to India,

jewellery still expected to grow YoY in

2018

Auto - Western Europe -passenger diesel, 15%

Auto - Western Europe -gasoline and other, 5%

Auto - North America, 6%

Auto - Japan, 6%

Auto - China, 3%

Auto - India, 2%

Auto - RoW, 7%

Jewellery, 32%

Industrial, 21%

Investment, 3%

0

10

20

30

40

50

60

2013 2014 2015 2016 2017 2018

AUTOMOTIVE DEMAND – EUROPE DIESEL IN CONTEXT

European diesel market share (%)

20Source: SFA (Oxford), NOTE* W. Europe auto demand split WPIC estimate. Based on 2017 platinum demand. LMC Automotive

• European passenger diesel decline

affects c15% of platinum demand

• Recent declines due to consumer fears

–policy uncertain

• Diesel car resale values under threat

Platinum demand – automotive in context

EUROPE DIESEL – WHAT’S HAPPENING?

Source: SMMT, EC, WPIC Research. HEVs – Hybrid Electric Vehicles; BEVs – Battery Electric Vehicles; PHEVs – Plug-in Hybrid Electric Vehicles. 21

UK powertrain market share

0.0%

1.5%

3.0%

4.5%

6.0%

7.5%

9.0%

0%

10%

20%

30%

40%

50%

60%

Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17

Diesel Petrol BEV (rhs)

PHEV (rhs) Petrol hybrid (rhs) Diesel hybrid (rhs)

Petrol

Diesel

10%

20%

30%

40%

50%

60%

90

110

130

150

170

190

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

UK CO2 emissions (g/km) EU 2021 CO2 target (g/km)

Diesel market share (rhs)

• German cities allowed to implement

diesel bans

• Reduction in diesel share leading to

demonstrably higher CO2 (EVs not

“saving the day”)

• CO2 fines increasingly likely (€8bn -

€13bn)

• Steps needed to flatten / increase

diesel share

UK CO2 emissions vs UK diesel market share

AUTOMOTIVE DEMAND – EUROPE WEAKNESS, REST

OF WORLD STRENGTH


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2013 2014 2015 2016 2017 2018f

koz

Automotive demand

W. Europe diesel headwinds expected to

be mostly offset by:

• Upside from U.S. passenger diesel

share, China heavy duty

• Growth in RoW

Source: JMAT, ECV International, ICCT *NOTE – vehicle manufacturer credits as based on MIIT interim proposals

Automotive demand

23

Fuel cell demand (c50 koz) growing strongly:

• China “New Energy Vehicle” (NEV)

incentives favour FCEVs over BEVs

(range benefit)

• Larger applications gaining traction

• Non-road applications being adopted

China NEV credits

New Energy Vehicle NEVElectric range

(km)

Per-vehicle

manufaturer credit*

Battery Electric Vehicle BEV 80-150 2

Plug-in Hybrid Electric

VehiclePHEV >50km 2

Fuel Cell Electric Vehicle FCEV >350km 5

AUTOMOTIVE DEMAND – MEDIUM TERM UPSIDE FROM

FUEL CELLS

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Palladium Platinum - base Platinum -

Scenario 1

Platinum -

Scenario 2

W. Europe Japan North America China RoW

24

Longer term, switching upside (900 koz)

Scenario 1

• 20% from N. America -> +c410 koz

• 5% from Europe -> +c80 koz

Scenario 2

• 20% from China -> +c410 koz

Source: SFA (Oxford); WPIC Research (scenarios, based on 2016 demand)

Switching scenarios (koz) - Pt replacing Pd in gasoline cars

AUTOMOTIVE DEMAND – MEDIUM TERM UPSIDE FROM

SWITCHING


2017, Q4 2017 AND 2018 FORECAST

1. Introduction

Paul Wilson


Trevor Raymond


Trevor Raymond

4. Questions

Paul Wilson, CEO, WPIC


25

Documents

Platinum Quarterly Q4 2017 Presentation · PLATINUM QUARTERLY PRESENTATION Q4 2017 London 8th March, 2018. COPYRIGHT AND DISCLAIMER IMPORTANT NOTICE AND DISCLAIMER: This publication