It's interesting the spin major media puts on events in the resource sector.
Like this week -- when one of the big discussion points was a report from the World Platinum Investment Council (WPIC) discussing the current state of the platinum market, as well as supply and demand fundamentals for the metal going forward.
Most news services seized on one fact: that the WPIC is forecasting a platinum supply deficit of 445,000 ounces for 2015. And that's considerably lower than the 785,000-ounce deficit the market saw during 2014.
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There was thus a lot of talk about the supply deficit "shrinking," and the market becoming more in balance this year.
But that interpretation completely ignored one of the other findings from the WPIC's report.
The thing is, it was a certainty that the 2015 platinum supply deficit would be lower than last year. Because 2014's platinum production was all but halted for five months by labor strikes in South Africa.
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The fact that the deficit is lower this year is therefore not indicative of any longer-term trend. But the scale of this year's deficit, by contrast, tells us a lot.
The WPIC's new forecast of a 445,000-ounce deficit is in fact an incredibly shocking figure. Because of how it compares to supply forecasts that the group put out just four months ago -- when the deficit was seen being much lower than this week's report would suggest.
Back in May, the WPIC released research pegging the 2015 supply deficit at just 190,000 ounces. Meaning that the group's new forecast of a 445,000-ounce deficit has jumped by 134 percent in a matter of months.
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The reason? Platinum buying by exchange traded funds (ETFs) that hold physical platinum -- which WPIC noted were net buyers of 60,000 ounces of platinum during Q2.
The group notes that the sharp increase in investment buying is almost single-handedly responsible for the big shift in supply-demand fundamentals seen this year. And that's a story that is critical to keep an eye on.
Here's to getting the point,
Dave Forest
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