Is there a shortage of Platinum in the market?

Tuesday 31 May 2022

Dear Investor,

The investment case for platinum continues this week with a look into the supply and demand for this often-overlooked precious metal.

You may recall our previous articles explaining how platinum and palladium are part of what’s called platinum group metals (PGMs)…which actually comprise of six metals: Platinum (Pt), Palladium (Pd), Iridium (Ir), Osmium(Os), Rhodium (Rh) and Ruthenium (Ru).

Today we investigate the supply and demand issues currently impacting platinum and palladium, and how this could lead to a potential price move.

Demand for platinum and palladium is increasing.

Platinum and palladium have a wide variety of industrial applications. Their versatility in goods makes them highly desirable for manufacturers. Plus, they are rare enough to be economically mined but nowhere near as common as gold or silver.

They are the densest metals known on earth, resistant to chemicals, heat and corrosion. You’ll find them in jewellery, medical devices, and a wide variety of electronics. While still under investigation, both are showing potential in with working hydrogen.

They are used in a wide variety of medical and electronic uses but their most important current use is in catalytic converters. A catalytic converter sits near the car engine and breaks down the pollution that comes out of the exhaust. In other words, it scrubs the exhaust fumes that come out of the tail pipe before they enter the environment.

It is platinum and palladium’s increasing industrial utility which is driving investor interest in these two metals. With the recent price fall in both, keen precious metal investors are looking at future demand for platinum and palladium increasing, knowing that supply of these is going to struggle to keep up.

Over the past couple of decades, the market for platinum and palladium has deepened giving investors access to an alternative precious metal. Something that has the benefit of acting like a commodity as well as having the potential to being a long-term storm of wealth.

Could Russia sanctions lead to a supply shortage of platinum and palladium?

You may be familiar with Russia’s dominance in the world palladium market producing about 40% of the world’s mined palladium, with South Africa a close second and a big jump to Canada in third place.

As sanctions and boycotts against Russia have intensified since its invasion of Ukraine, palladium prices have risen to all-time highs of just below US$3500/oz on supply fears.
As Stockhead explains,

“Palladium dropped to under US$3000/oz after the London Platinum and Palladium Association said it would keep Russian refiners off its no-go list, prices remain close to the previous all-time high set last year in anticipation of a post-pandemic recovery in auto demand.__”

However, we could be seeing a shortage of platinum in the spot market on the horizon. According to a recent report from the World Platinum Investment Council,

“Platinum lease and exchange for physical (EFP) rates have spiked to over 10% and dropped below negative US$20/oz respectively in the past fortnight. Together they suggest that there is a shortage of readily available metal in the spot market, possibly due to logistical challenges. While we do not know the exact reason behind the shortage, we saw similar moves in 2020 due to COVID disruptions, exacerbated by the ACP which led to a 12-month uplift in platinum prices. Could the Russia question be the ACP outage of 2022? “

Implied platinum lease rates

Source: World Platinum Investment Council

Read the full report here.

The report presents data that the potential unavailability of Russian origin platinum could lead to constrained supply. Potentially driving a period of sustained gains in the platinum price, as seen in 2020.

Why invest in platinum or palladium?

Why invest in these precious metals? It comes down to their scarcity and their inelastic supply.

Mining supply for platinum and palladium lags demand, and it can take many years for new mining to come online when there’s an imbalance.

Platinum and palladium are extremely rare, and supply is concentrated to just a handful of countries. Production of these can’t be ‘dialled’ up to meet extra demand.

To truly understand the investment case for both these rare, precious metals, click below to watch our interview with Trevor Raymond, director of research from the World Platinum Council. We discuss the current supply problems facing platinum and palladium and how more people are investing in these precious metals.

How to invest in platinum and palladium

ABC Bullion is proud to be the first Australasia's precious metals specialist to offer an extraordinary array of platinum minted bar sizes.

Each tablet showcases the signature ABC Bullion square ingot logo repeated diagonally across the obverse side. The reverse side is stamped with the ABC Bullion logo, weight, 'PLATINUM 999.5'

For palladium, ABC Bullion offers palladium investment through our Pool Allocated option, or through our partnership with Valcambi.

Warm regards,

The ABC Bullion Team