JOHANNESBURG (miningweekly.com) – With the platinum price now over the $1 000/oz threshold, many are holding thumbs that price discovery will be further elevated by China as it proposes an inventive global platinum and palladium trading ecosystem that has far-reaching implications.

Envisaged are platinum and palladium futures contracts that uplift the way these two metals are purchased and traded, amid price risk amelioration particularly for domestic market participants in China, but also internationally.

As the countdown begins towards next month’s July 7 to 10 Shanghai Platinum Week, hopes are high that China will introduce the first cornerstone of what will likely be global trading augmentation and add to price discovery, which is key for the overall market.

China’s platinum group metals (PGMs) market is essential to the country’s energy transition and ongoing decarbonisation efforts. Being acutely recognised is the valuable role that PGMs play in decarbonisation, firstly through the generation of green hydrogen by PGM-catalysed electrolysers and then through the generation of green electricity through PGM-catalysed fuel cells.

The availability of domestic futures could potentially boost consumer confidence in platinum and palladium, increase recycled metal availability, and accelerate demand growth.

Within the core automotive, industrial, jewellery and investment demand segments combining to provide a beneficial degree of resilience to price cycles, there is also the increase in the diversity of the applications of PGMs, which is very beneficial, particularly in view of many end-uses being price inelastic.

Ahead of Shanghai Platinum Week No 5, Mining Weekly has been informed that the Guangzhou Futures Exchange (GFEX) is close to regulatory sign-off of the promising new trading framework.

GFEX is where physically settled platinum and palladium futures have the potential to transform domestic price risk management and uplift demand for platinum products.

Acceptable will be platinum and palladium in the form of ingots and sponge – pure metal in powder form – as opposed to just ingots.

The ability to take delivery of sponge could be transformative for industrial users of PGMs, as well as automakers, as this is the main form typically used for their manufacturing purposes. No other exchange in the world allows delivery of sponge.

Other benefits of the GFEX’s new futures are likely to include a mechanism for businesses involved in the market to hedge price risk and better manage their operations. For example, the removal of price risk will allow platinum jewellery and investment product fabricators to reduce the premium charged for platinum products as well as the discount on buyback.

To date, Shanghai Platinum Weeks have repeatedly demonstrated their ability to leverage China’s position as the number one PGMs market through the country’s admired platform for serious learning, unequalled engagement and provision of exceptional networking opportunities.

A highlight this year will be the keynote address by Valterra Platinum CEO Craig Miller, marking the renamed company’s first such undertaking in Asia following the demerger from Anglo American plc.

Day one will close with a ceremony to launch a specially commissioned medal in commemoration of the event’s fifth anniversary. Designed in 999.5 platinum by renowned coin designer and master engraver Luo Yonghui, the medal has a limited mintage of 200 pieces.   

Last year, online attendance alone hit the 470 000 mark even though virtual attendance was only available in China.

The concept of the GFEX’s platinum and palladium contracts is seen as ground-breaking for the PGMs market globally and any mechanism that enhances the overall stability and efficiency of the Chinese platinum market will likely have inherent benefit for the broader global market.

Given South Africa’s overwhelming global PGMs primary supply dominance, a specially created Johannesburg Stock Exchange reportage platform linkage with China’s GFEX would be hugely advantageous.

SMALL INVESTMENT BAR SALES ROCKETING

Meanwhile, great news for platinum is that platinum jewellery demand and platinum investment demand are resurging in China, where a major Beijing jeweller, for example, is including platinum investment bars in its offering.

Simultaneously,  platinum bar sales are also being facilitated on the ubiquitous TikTok social media platform.

Interestingly, Chinese first-quarter buying of platinum investment bars smaller than 500 g has rocketed by 140% year-on-year to a record 31 000 oz, with overall first-quarter bar and coin demand up 17% to 70 000 oz.

The current surge in both platinum investment and platinum jewellery demand in China will also feature as a central topic for discussion. Prior to the initial Shanghai Platinum Week, platinum investment demand in China was negligible. This year, platinum investment demand in China is expected to rise to 281 000 oz.