The fu­ture may not be plat­inum

High prices could dent de­mand

Finweek English Edition - - Economic trends and analysis - GARTH THE­UNIS­SEN

EVER WON­DERED why plat­inum is nearly twice the price of gold? One rea­son is that plat­inum is the clas­sic “famine metal” – with pro­duc­tion con­fined to a few ge­o­graphic lo­ca­tions and with more that 80% of known re­serves found in just one coun­try: South Africa.

The other rea­son is that lit­er­ally ev­ery ounce of plat­inum pro­duced each year is used by in­dus­try, par­tic­u­larly the au­to­cat­a­lyst in­dus­try, which snapped up more than 62% of the 7m ounces pro­duced last year.

The ma­jor­ity of that goes to Europe, where strict ve­hi­cle en­gine emis­sion leg­is­la­tion and the high level of diesel en­gine pen­e­tra­tion (more than 50% of the mar- ket) keep de­mand for cat­alytic con­vert­ers grow­ing at a steady pace.

How­ever, this tight bal­ance be­tween de­mand and sup­ply could end up be­ing plat­inum’s doom. John­son Matthey ex­pects de­mand for plat­inum jew­ellery to have fallen by 11% last year due to high prices, while JP Morgan says man­u­fac­tur­ers of cat­alytic con­vert­ers are in­creas­ingly sub­sti­tut­ing cheaper pal­la­dium for more ex­pen­sive plat­inum.

Of course, the real dan­ger is that some tech­no­log­i­cal in­no­va­tion could re­place plat­inum al­to­gether. Af­ter all, as some­one once said: the Stone Age didn’t end due to a lack of stones.

PLAT­INUM SUP­PLY AND DE­MAND

Source: John­son Matthey

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