LONDON (Reuters] – Due to Russian supply concerns, automakers are rushing to reduce their use of palladium and increase the amount they use platinum. The World Platinum Investment Council (WPIC), which released Monday’s statement, predicted a significant surplus in the platinum markets this year.

Automobile manufacturers were already moving to platinum because it is less expensive than palladium. But a faster transition to platinum would boost demand, raise prices, and have the opposite effect to palladium.

Russia supplies around 25%-30% of world’s palladium, and 8-10% to its platinum.

Although there are no signs that Russian exports have been restricted by sanctions since the February invasion of Ukraine, additional companies could boycott Russian-made metal, and government restrictions may be implemented.

Trevor Raymond (WPIC’s chief of research) stated that “the substitution effort has increased tremendously.” The savings that automakers can achieve are huge. Added to that are concerns over the availability of palladium.

The cost of platinum is half that of palladium, at around $950 an troy ounce. The automotive industry uses between 2.5 and 3 million ounces each of platinum, as well as about 8.5million ounces per year of palladium.

The WPIC’s latest quarterly report stated that the approximately 8 million-ounce-per-year platinum market will be undersupplied with 627,000 ounces, following an excess of 1.13million ounces in 2021.

The company forecasted that there would be a surplus in 2022, at 652,000 ounces.

According to the WPIC, in the quarter of January-March, platinum demand declined 26%years-on-year while supply dropped 13%. The result was that the market was oversupplied with 167,000 ounces.

According to the report, for the entire year supply will be 5% lower than 2021, and demand will be 2% higher. This is due to increased production of light-duty vehicles, heavier vehicle loadings to comply with tighter emission regulations, and palladium substitution.

Below are comparisons and numbers for supply and demand.

ANNUAL PLATINUM SUPPLY/DEMAND (‘000 oz)*

2021 2022f 2022f/2021

Variation in percent

SUPPLY

6.297 Refined Production 5.872 -7%

Productor Inventory +/–93 0-100%

Recycle 1,953 1,909

TOTAL SUPPLY 8.156 7.781 -5%

DEMAND

Auto 2,643 3:055 16%

Jewellery 1923, 1,886 1.2%

Industrial 2,508 2,109 -16%

Which chemical 688 613 is -11%?

Petroleum 172 193 12%

– Electric 135 127

– Glass 715 331, -54%

– 244 Medical 257 5%

– Other 5555 588 66%

Investment -45 104

– Coins and Bars 332 254 23%

ETF Holdings 238 -50 79%

– Stock Exchange -139-100 -28%

TOTAL DEMAND 7.029 7.155 2%

MARKET BALANCE 1,128 627 -44%

Above Ground Stocks 3,752 4,379 17%

QUARTERLY PLATINUM SUPPLY/DEMAND (‘000 oz)*

Q1 2021 Q4 2021 Q1 2022 Q1/Q1 %

Change

SUPPLY

1.695 1.279 13%

Produce Inventory +/- 29 -39 9 0 -100%

Recycle 518 53 415 415 -20%

TOTAL SUPPLY 1,553 2,109 1,695

DEMAND

Automotive 724 680 725

Jewellery 479 399 437

Industrial 707 624 533 -25%

– Which chemical is 119 200 112? -7%

Petroleum 37-57 44 21%

– Electrical 33 32 30, -9%

– Glass 318 121 138 -56%

Medical 57 67 65 15%

– Other 143/147/144 0%

Investments: 159,108,167, -205%

– Coins, bars and coins 21 95 60 192%

ETF Holdings 101 -155,169, -261%

Exchange Stocks 33-48 58 -2273%

TOTAL DEMAND 2,069 1,528 -26%

MARKET BALANCE -116 413 167 -244%

* Source: World Platinum Investment Council, Platinum Quarterly Q1 2022