Platinum Market Heading Towards Supply Crunch


A number of different commodities are dealing with what appears to be a common trend in the sector: a lack of supply. As many precious and industrial metals face shortages in the upcoming years, many experts are sounding the alarms today.

Platinum, the sister metal of palladium, is one of these metals, and as the platinum industry heads towards their annual meeting in London soon, the main question faced by miners and analysts alike is whether platinum’s price will skyrocket in the coming years due to a potential lack of supply in the future.

At the moment, this seems to be the case. Prices of platinum have been driven mostly by autocatalysts, the demand of which has surged this year to levels not seen since 2016. Many car manufacturers have flirted with the idea of moving away from palladium and more towards platinum in their catalytic converters.

While this line of thinking was mainly motivated by the price of palladium, which previously had reached record highs, companies are still expected to learn from this and begin to slowly implement platinum into their converters.

The World Platinum Investment Council (WPIC) has gone on to predict that the supply surplus will shrink this year, while many other experts predict 2019 will see a deficit.

According to Alison Cowley, an analyst at catalytic converter producer Johnson Matthey, there has been “a dramatic turnaround in sentiment, particularly among European and South African ETF investors.” Additionally, she went on to say that most of this new interest isn’t due to a switch away from palladium but genuine, new investment interest.

Platinum prices have had a significant recovery after reaching decade lows in August 2018, reaching below $750 per ounce. Just two years prior, prices had reached $1,200 per ounce, and while prices have recovered somewhat, they’ve struggled to breach the $900 barrier.

Regardless, the WPIC expects this to change as platinum’s surplus is expected to decrease by 44 this year down to 375,000 ounces. Johnson Matthey, however, expects this to go down even further, reaching a 127,000-ounce deficit by the end of the year.

The main reason why platinum has struggled in recent years has come down to the fact that consumers have moved away from diesel vehicles in favor of gasoline, which uses less platinum and more palladium to reduce pollution.

At the same time, there is still a significant quantity of above-ground platinum reserves that need to be used up before a deficit would occur, so large upswings in price aren’t expected until later in the year when these reserves will be more depleted.

As for platinum’s sister metal, palladium has reached $1,327 per ounce on Monday, a significant decline from it’s earlier record high of $1,557 per ounce back in March. The precious metal has struggled to regain momentum since it’s fall, reaching $1,447 per ounce in mid-April before plummeting back down towards its current level.

Shortages for palladium are expected to continue, however, as Johnson Matthey predicts deficits will increase to 809,000 ounces on growing auto catalyst usage. However, factors such as the ongoing wage disputes in South Africa, one of the world’s largest producers of the precious metal, could drastically impact prices and output.