Platinum Prices Surge as Supply Shortages Loom

Platinum prices have risen as investors anticipate supply shortages due to power outages at South African mines and increased demand from the automotive and hydrogen industries. Prices rose from just above $900 per ounce in late February to a high of $1,132.17 on April 21, the highest in more than a year, before easing to around $1,050 by Tuesday.

Platinum is used in the automotive industry, as well as other industries and jewellery, to neutralise harmful engine emissions. A number of factors have contributed to the recent price increase, including increased demand from the automotive industry, which is the largest consumer of platinum. As vehicle production increases, StoneX analyst Rhona O’Connell forecasts an 8% increase in demand from the auto industry this year.

Investors are also placing bets on the hydrogen industry, which is seen as a potential driver of future platinum demand. Large amounts of platinum are required in the production and use of hydrogen, and many investors believe that this will result in increased demand for the metal in the coming years.

However, some analysts have expressed concern that the hydrogen industry’s growth may take longer than expected. According to Macquarie analysts, the sector will account for approximately 220,000 ounces of demand in 2030 but will approach 2 million ounces by 2040.

Despite the bullish sentiment, there are some concerns about the platinum supply. South Africa produces 70-75% of the world’s mined platinum supply, and South African miners have warned that rolling power outages could reduce output by 5-15% this year. This, combined with potential Russian production disappointments, could result in supply shortages and price increases.

According to Standard Chartered analyst Suki Cooper, the platinum market is already showing the first signs of serial deficits. Cooper warned that prices may fall in the short term before supply concerns worsen later in the year.

In recent weeks, exchange-traded funds (ETFs) that hold platinum for their shareholders have also purchased large amounts of the metal. The World Platinum Investment Council (WPIC), which tracks these funds, reported that in late April, ETFs purchased approximately 120,000 ounces of platinum in a matter of days.

This year, the WPIC predicts a shortfall of around 500,000 ounces in the roughly 8 million ounces-per-year platinum market, while O’Connell predicts a deficit of 900,000 ounces. As investors scramble to secure supplies, these deficits may put additional upward pressure on prices.

Finally, the platinum market is experiencing strong demand from the automotive and hydrogen industries, as well as ETFs, which are purchasing large amounts of the metal. However, concerns about platinum supply remain, with South African mines warning of potential output cuts due to power outages. This, combined with potential Russian production disappointments, could result in supply shortages and price increases. As a result, investors will be watching the market closely in the coming months for signs of further price increases.