The price of platinum is currently increasing due to a combination of factors, primarily a significant supply deficit and rebounding demand in key sectors.
Here’s a breakdown of the main causes:
1. Supply Deficit:
- South African Mining Issues: The vast majority of global platinum supply (over 70%) comes from South Africa. This region is prone to disruptions from:
- Labor strikes: Historically, strikes have significantly impacted production.
- Power outages: Frequent electricity problems and power cuts hinder mining and processing operations.
- Aging infrastructure and regulatory changes: These can lead to increased production costs and reduced output.
- Declining Secondary Supply (Recycling): While recycling plays a role, a drop in secondary supply from sources like catalytic converters can contribute to the overall deficit.
- Mine Closures: Some platinum mines, even high-yielding ones, are being closed, further tightening supply.
2. Rebounding Demand:
- Automotive Industry: This is the largest consumer of platinum, primarily for catalytic converters in internal combustion engine (ICE) vehicles.
- Stricter Emission Standards: Global regulations (like Euro 6 in Europe and Bharat Stage VI in India) require more efficient catalytic converters, boosting platinum demand.
- Shift back to ICE vehicles: Despite the long-term trend towards EVs, there’s been a recent pushback on banning ICE vehicles in some regions, leading to increased demand for platinum in these vehicles.
- Hydrogen Fuel Cell Vehicles (FCEVs): Platinum is crucial in fuel cells, and as this technology advances, demand from this sector is expected to grow.
- Jewelry: Demand for platinum jewelry, especially in emerging markets like China and India, continues to be strong.
- Industrial Applications: Platinum is used in various industrial processes, including chemical production (e.g., fertilizers, petroleum refining), electronics, and glass manufacturing. Growth in these industries contributes to demand.
- Investment Demand: Platinum is increasingly seen as a strategic investment asset, and during periods of economic uncertainty or inflation, investors may turn to precious metals as a safe haven. There’s also a belief among some investors that platinum is currently undervalued.
In summary, the core reason for the price increase is that demand is outstripping supply, creating a market deficit. This deficit is expected to continue for the foreseeable future, which is attracting more investor attention to the “forgotten precious metal.”
