Platinum edges out of the doldrums at last as labour threat looms

April 12, 2019

Johannesberg (April 12)  After months of being ignored in favour of market darling palladium, platinum is finally getting some attention from investors.

The metal, which is mostly used to make jewelry and reduce emissions from car exhausts, is trading near the highest since May and money is pouring into platinum-backed exchanged-traded funds. Prices have gained as expectations for tough wage negotiations this year in top producer South Africa raised the threat of supply disruptions, and platinum’s cheapness relative to other precious metals is also prompting a second look by investors.

“Platinum has been beaten up too much and became too cheap,” said Georgette Boele, senior FX and precious metals analyst at ABN Amro Bank NV. “The fundamentals are not as negative as perceived.”

Here are four charts that show how the mood in the platinum market is changing:

It’s cheap

Palladium’s record-setting run early this year catapulted the metal’s premium over platinum to a fresh high in March. The big gap is spurring speculation that carmakers may start working toward substituting platinum in for palladium in their autocatalysts.

One of the reasons platinum fell out of favour was the dimming outlook for diesel-fuelled vehicles, which mainly use the metal in their autocatalysts. (Palladium is favoured in gasoline cars.) However, manufacturers can take steps to use more platinum instead, if there’s enough incentive to make the change. There are also encouraging signs that diesel’s share of the auto market is stabilising.

Platinum is also historically cheap relative to gold, although the spread has started to narrow in recent weeks. Platinum for immediate delivery traded at about $894 an ounce on Friday, while gold was at $1,293 an ounce.

Strike threat

Platinum supply has outpaced demand for the past two years and the World Platinum Investment Council has forecast another global surplus this year of 680 000 ounces. However, that may change if the South African wage talks later this year break down and workers down tools for an extended period of time.


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