WPIC Platinum Quarterly Q2 2018 Presentation · weddings (Adhik Maas) Q2 2018 DEMAND: INDUSTRIAL DEMAND HIGHER ON NET GROWTH IN PETROLEUM AND OTHER V Q2 2017 Source: WPIC Platinum

PLATINUM QUARTERLY PRESENTATION

Q2 2018

London

6th September, 2018

COPYRIGHT AND DISCLAIMER

2

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AGENDA: PLATINUM QUARTERLY

Q2 2018 AND 2018 REVISED FORECAST

1. Introduction

Paul Wilson, CEO

2. Platinum Quarterly, Fundamentals review

Trevor Raymond

3. Focus on fundamental drivers

Trevor Raymond

4. Questions

Paul Wilson

Trevor Raymond

3



1. Introduction

Paul Wilson


• Q2’18

• 2018f revision

Trevor Raymond, Director of Research


Trevor Raymond

4. Questions

Paul Wilson

Trevor Raymond

4

Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford) 5

SUPPLY Q2 2017 // Q1 2018 Q2 2018

Refined Production 1,555 1,305 1,575

South Africa 1,090 905 1,125

Zimbabwe 125 115 110

North America 85 90 85

Russia 205 145 205

Other 50 50 50

Inc(-)/Dec(+) in Producer Inventory +75 -10 +65

Total Mining Supply 1,630 1,295 1,640

Recycling 480 455 480

Autocatalyst 330 330 345

Jewellery 150 125 135

Industrial 0 0 0

Total Supply 2,110 1,750 2,120

Q2 2018 SUPPLY: STRONG Q2 AS EXPECTED

MINING AND TOTAL SUPPLY FLAT YOY

• Seasonally strong Q2 as expected

• Total mining supply up 1% (10koz) YoY

inclusive of 65 koz inventory reduction

• Recycling flat YoY

• Annual total supply still trending lower

– H1’18 just below H1’17

MINING SUPPLY: DECLINING TREND INTACT, DESPITE

TEMPORARY QUARTERLY PICKUP

Source: WPIC Platinum Quarterly Q2 2018, SFA (Oxford)

Total mining supply and refined production

Refined production Total mining supply

Temporary factors raised mine production

in Q2 2018

• S.A. production up on: a shaft in ramp-

up phase, mining of high grade area at

a major operation and improved

concentrator performance

• S.A. shaft closures in 2017 reduced

supply by 25koz in Q2’18

• Net 65 koz reduction in inventory lifted

total mining supply 1% YoY

6

RECYCLING: QUARTERLY INCREASE BUT FLAT ANNUAL

LEVEL EXPECTED


• Q2 recycling flat YoY

• Autocatalyst recycling up 15 koz QoQ

(+5%), driven by high scrap steel price

• Jewellery scrap up 10 koz QoQ (+8%),

but low platinum price continues to

disincentivise recycling

• Full year recycling marginally higher as

growth in autocatalyst recycling to be

offset by lower jewellery recycling

Autocat and jewellery recycling

7

0

100

200

300

400

500

600

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Q1'18

koz

Autocat Jewellery

DEMAND Q2'17 // Q1'18 Q2'18

Automotive 840 805 800

Autocatalyst 805 765 770

Non-road 35 35 40

Jewellery 590 605 590

Industrial 415 465 445

Chemical 140 145 140

Petroleum 15 40 40

Electrical 45 55 45

Glass 50 70 45

Medical & Biomedical 70 55 70

Other 95 100 105

Investment 100 50 -55

Change in Bars, Coins 70 75 70

Change in ETF Holdings 30 -15 -125

Change in Stocks Held by Exchanges 0 -10 0

Total Demand 1,945 1,925 1,780

Balance 165 -175 340

Q2 2018 DEMAND: AUTO & INVESTMENT DOWN

JEWELLERY FLAT, INDUSTRIAL UP V Q2 2017


• Automotive demand down 35koz YoY

as W. Europe diesel sales continue to

fall

• Jewellery flat YoY

• Industrial demand up 30 koz YoY

• Bar and coin demand solid in Q2 but

offset by ETF redemptions of 125 koz

• Total demand down 145 koz QoQ with

340 koz surplus in Q2’18

Q2 2018 DEMAND: AUTOCATALYST DEMAND DOWN ON

FALLING EU DIESEL SALES


Autocatalyst demand, quarterly

Autocatalyst demand, half-yearly

9

• Autocatalyst demand fell to 800 koz in

Q2’18 from 840 koz in Q2’17

• Third consecutive Q2 and H2 declines

as fall in W. Europe diesel sales

continues

• Increasingly severe financial impact on

automakers from falling diesel sales

Q2 2018 DEMAND: JEWELLERY WEAKER IN CHINA

MODEST GROWTH IN ALL OTHER REGIONS


Jewellery demand koz

10

• Jewellery demand was 590 koz in

Q2’18, flat YoY and down 3% QoQ

• Gains in India, Europe and North

America offset weakness in China

• Mainland China (all) retail jewellery

sales dropped 10% YoY in Q2’18

• Indian growth small in Q2’18 as it

included an inauspicious period for

weddings (Adhik Maas)

Q2 2018 DEMAND: INDUSTRIAL DEMAND HIGHER ON

NET GROWTH IN PETROLEUM AND OTHER V Q2 2017


Industrial demand koz

11

• Net platinum demand was 445 koz in

Q2’18, up 30 koz (+7%) YoY

• New metal up on refining capacity

expansion in Asia and RoW; reduced

recycling supply from 2017 closures in

Japan

• Rising demand for fuel cells (Japan)

and automotive sensors (China and

RoW) increased platinum consumption

in other end-uses

Q2 2018 DEMAND: INVESTMENT DOWN

JAPANESE BAR DEMAND STABLE, ETF OUTFLOWS


Investment demand by category

Bar and coin ETFs Exchange stocks

12

-400

-300

-200

-100

0

100

200

300

400

Q3'14 Q1'15 Q3'15 Q1'16 Q3'16 Q1'17 Q3'17 Q1'18

koz

Net

• Platinum investment demand net

negative in Q2

• Bar & coin demand strong at 70 koz;

additional 10 koz US Mint release

• ETFs down 125 koz in Q2’18; net sales

in all regions

• Exchange stocks were flat despite

reduced long positioning

SUPPLY 2017 2018f YoY, oz YoY, %

Refined Production 6,140 6,025 -115 -2%

South Africa 4,385 4,335 -50 -1%

Zimbabwe 480 460 -20 -4%

North America 365 365 0 0%

Russia 720 680 -40 -6%

Other 190 185 -5 -3%

Inc (-)/Dec (+) in Producer Inventory +30 -10 -40 -133%

Total Mining Supply 6,170 6,015 -155 -3%

Recycling 1,890 1,895 5 0%

Autocatalyst 1,325 1,385 60 5%

Jewellery 560 505 -55 -10%

Industrial 5 5 0 0%

Total Supply 8,060 7,910 -150 -2%

DEMAND

Automotive 3,340 3,130 -210 -6%

Jewellery 2,460 2,445 -15 -1%

Industrial 1,700 1,790 90 5%

Investment 265 250 -15 -6%

Total Demand 7,765 7,615 -150 -2%

Balance 295 295 - -

Above Ground Stocks 2,200 2,495 295 13%

2018 FORECAST: SIMILAR SURPLUS TO PREVIOUS

FORECAST WITH SUPPLY AND DEMAND DOWN


• Total mining supply to fall by 3% in

2018: S.A. supply down 1% to 4,335

koz as 2017 loss-making production

closures reduce supply by 105 koz

• Total supply down 2% on flat recycling

as +5% autocat offset by -10%

jewellery

• Total demand to fall 2% on lower

automotive, jewellery and investment

• Surplus in 2018 to be same as in 2017

at 295koz or 3.9% of total demand



1. Introduction

Paul Wilson


Trevor Raymond


• Price and gold

• Demand drivers: Industrial & Auto


4. Questions

Paul Wilson

Trevor Raymond

14

SHORT TERM PLATINUM TRADING IGNORES

SUPPLY/DEMAND BUT TRACKS GOLD

Gold’s impact on platinum stays high as

platinum supply/demand largely ignored

• Platinum’s high correlation with gold

since 2011 encourages a predictable

add-on to many gold trades

• Platinum argued as less liquid than gold;

trusted ‘geared’ add-on to gold trades

• Platinum price falls, unrelated to platinum

supply/demand, discourages investment

in platinum

• Platinum offers ‘gold-like’ diversifier

(driven by gold’s macro drivers) with re-

rating upside

15Source: Bloomberg, WPIC research

Platinum and gold - price tracking examples

INCREASING ADOPTION OF ALL FUEL CELLS IS

ENHANCING HYDROGEN INFRASTRUCTURE

Fuel cell growth on same ‘mass adoption’ trajectory as early wind and solar

• Heavy duty fuel cell trucks and buses, typically depot-based (drayage, city fleets etc.), to

drive H2 refilling rollout and short-term platinum demand growth

• Significant focus in Asia – China plan will double global H2 refuelling points to over 600

16

Fuel Cell, Solar PV & Wind Turbine annual power generation (MW)

Source: Electron Communications, www.fuelcellindustryreview.com, *Matthew Klippenstein

“Wind in 1994 and

Solar in 2002 meet

Fuel Cells in 2017” *

http://www.fuelcellindustryreview.com/

WPIC INCREASING ENGAGEMENT AND COVERAGE TO

DRIVE RETAIL INVESTMENT DEMAND OPPORTUNITY

WPIC increasing retail awareness & ownership

• Replicating high retail ownership successes in Japan

• WPIC Product partnerships increase product availability and distribution channels

Recent topics

• Increased global access to healthcare drives platinum medical demand

• Platinum’s long standing premier status – now at the pinnacle of global sport

• Royal Mint’s first platinum bullion coins – sales of 30koz in 12 months to March 2018

17Source: Johnson Matthey

Awareness of new and long-standing uses

New more flexible Pt coil treating aneurysms

Premier metal and investment asset

Team USA win inaugural Athletics World Cup

PUBLISHED SUPPLY DEMAND DATA SOMETIMES

EXCLUDES PROPRIETARY DATA

Very large participants, high-tech IP and highly competitive – confidential strategy

• Competitive IP attached to platinum usage in many applications

• PGMs in automotive emissions control – technically complex with low disclosure

• VW and diesel emissions scandal increased reputation risk

• Low NOx strategies – platinum loadings and planned number of diesel cars on the road

• Platinum substitution for palladium in gasoline

NOx emissions participants: Auto and component OEMs

18

Hard Disk Drive makers; PC and Cloud

Seagate

Western Digital

Toshiba

Daimler BMW VW

Fiat Chrysler Renault Nissan

Johnson Matthey

BASF

Umicore

Bosch

AUTOMAKER DIESEL AND NOX STRATEGIES NOT PUBLIC

HIGHER PLATINUM LOADINGS PART OF THE SOLUTION

• The choice of paying fleet CO2 fines or

keeping ‘clean-on-road’ diesels has

already been made

• Reducing NOx from > 700mg/km to

below 100 mg/km requires multiple

changes – platinum’s inclusion is highly

likely

More platinum is part of very low on-road NOx

19Source: WPIC research, Umicore. Notes LNT Lean NOx trap (or NOx Storage Catalyst (NSC), DPF (Diesel Particulate Filter – can be catalysed, SCR Selective Catalytic Reduction

Platinum loadings not public yet

• Higher platinum loading in Diesel Oxidation

Catalyst (DOC) to increase effectiveness of

NOx reaction with urea

• Higher platinum loading in Lean NOx Trap

LNT (or NOx Storage Catalyst, NSC)

SIGNIFICANT PLATINUM DEMAND GROWTH POTENTIAL

PT REPLACING PD IN 20% OF GASOLINE > 900KOZ/YEAR

Increased palladium supply risk; switching

to platinum in gasoline more likely

• Over 90% of palladium mined as by-product.

Price = value-in-use of best alternative (Pt)

• Sustained palladium deficits and rising price

increase availability concerns

• 2013 Johnson Matthey study on ‘in-service’

Euro 5 gasoline catalyst confirmed:

• Substitution ratio of 1:1

• No performance risk, no re-tooling

• No additional certification cost

Switching scenarios Pt replacing Pd (koz)

20

2013 JM study: Gasoline Pt:Pd ratio is 1:1

Source: Top: Johnson Matthey: A Study of Platinum Group Metals in Three-way Autocatalysts, Platinum Metals Review, J Cooper & J Beecham, 2013,57,(4), 281-288, © 2013 Johnson

Matthey, extracts from table V. http://dx.doi.org/10.1595/147106713X671457. Bottom: Bloomberg

http://dx.doi.org/10.1595/147106713X671457



1. Introduction

Paul Wilson


Trevor Raymond


Trevor Raymond

4. Questions

Paul Wilson, CEO


21

Documents

WPIC Platinum Quarterly Q2 2018 Presentation · weddings (Adhik Maas) Q2 2018 DEMAND: INDUSTRIAL DEMAND HIGHER ON NET GROWTH IN PETROLEUM AND OTHER V Q2 2017 Source: WPIC Platinum