There has been a significant change in market dynamics this year, with a strong growth in demand for platinum investment products in China and platinum jewellery that is over and above expectations initially published by industry organisation the World Platinum Investment Council (WPIC), research director Edward Sterck informs Mining Weekly.

While this momentum has the potential to add meaningfully to platinum demand, he says supporting market development requires careful stewardship, adding that it is also likely that high lease rates and tariff led risks to global growth could counterbalance this momentum to a degree.

In terms of the broader platinum group metals (PGMs) market dynamics, Sterck says platinum is in its third year of significant market deficit, whereas palladium and rhodium – which have greater leverage to the evolution of the automotive drivetrain mix – have a more nuanced outlook.

“The outlook for platinum to be in sustained market deficits is extremely attractive from an investment perspective and this is being reflected in current prices,” he notes, adding however that mine economics are not only dependent upon platinum but the pricing of all of the commodities produced.

While the PGM basket price as a whole has also improved, the WPIC’s analysis demonstrates that mine supply is highly price inelastic in the short-term.

“Indeed, even when palladium and rhodium prices appreciated significantly, driving the basket price to record levels for four years from 2019 to 2022, mine supply actually declined slightly, rather than responding positively to higher prices,” explains Sterck.

Reflecting on this historical relationship between price and mine supply, he says it is clear that higher prices for only three months are unlikely to stimulate any increase in existing mine supply.

Further, while the outlook for platinum is appealing, Sterck says the palladium and rhodium markets are likely to be more delicately balanced owing to more than 80% of their use being in catalytic converters, and recycling supply volumes which depends upon PGM pricing.

“With platinum in a deficit, the market has been balanced through a draw-down of above ground stocks. This is not a sustainable long-term solution,” notes Sterck.

For the two-and-a-half years of platinum’s deficits until May this year, Sterck says platinum’s price range of $900/oz to $1 100/oz was “clearly” insufficient to incentivise sales from above ground stocks.

However, from May this year, he notes that prices were needed to bring further material into the market, which resulted in the significant, and rapid, increase in the platinum price seen since then.

“The ongoing demand strength has not been isolated to the US, but China has also played a part, with an inflection point in platinum jewellery demand and ongoing strength in demand for investment products continuing to exceed expectations,” adds Sterck.

Indeed, he says China is the biggest market for PGMs globally and the importance of these critical minerals to China is no better illustrated than by the breadth of engagement at the recent Shanghai Platinum Week, the first day’s presentations of which were viewed online by more than 530 000.

Adding to market complexity, he highlights, was the emergence of tariff related fears resulting in a drive to onshore metal in the US after that country’s most recent election.

“We saw the tightness in the market begin to emerge in December 2024 with a steady increase in platinum lease rates and the London over-the-counter market moving into ‘backwardation’, both indicative of a shortage of metal in the spot market.

“Of course, the high lease rates are appealing to the holders of unallocated platinum metal, who are incentivised to lend metal out at attractive returns whilst retaining ownership and beneficial exposure to any potential price upside. This can provide temporary liquidity in a tight market that holds back price appreciation,” explains Sterck.

Despite the different directions that platinum demand is being pulled in, he forecasts that platinum will remain in deficit for the foreseeable future.

While palladium trends towards a surplus, Sterck also notes that this is contingent on price linked recycling supply growth.

Greenfields Development, Future

In terms of bringing new PGMs production online, Sterck highlights that while the WPIC does not specialise in mine supply forecasting, there are a number of geologically interesting pre-production exploration assets globally, including greenfield and brownfield options within South Africa.

Deciding to invest in developing a new mine, however, is contingent on having confidence in the longer-term demand outlook for the mined commodities, he notes, adding that, for platinum, the outlook for sustained demand appears clear, but that the longer-term (beyond ten years) outlook for palladium and rhodium is more difficult to discern given their higher exposure to ICE vehicle catalysis and the ongoing electrification of the global drivetrain.

Nonetheless, Sterck says growing demand for platinum investment and jewellery products, and the ongoing platinum deficits, are likely to help support substitution of platinum for other PGMs in other automotive and industrial applications, over time.

“For both new and existing production, this underlines the importance of market development activities to support end demand and the development of new end-uses for different PGMs,” he concludes.