Platinum Spot Price

Platinum spot rates are established through a complex interplay of global supply and demand dynamics. Reflecting the immediate market value of one troy ounce of platinum (0.0311 kilograms), the spot price is influenced by numerous factors, including industrial usage in catalytic converters, jewelry demand, economic indicators, geopolitical events, and mining output. These prices evolve through trading activities on different commodity exchanges, responding to real-time market conditions and investor sentiment. 

Key participants, such as miners, investors, and speculators, contribute to the continuous process of price discovery, reacting to many economic and geopolitical variables affecting the platinum sector. While the COMEX (Chicago Mercantile Exchange) influences gold and silver prices, its impact on platinum rates is generally considered less significant compared to the LPPM (London Platinum and Palladium Market) and NYMEX (New York Mercantile Exchange). 

Platinum trading on the COMEX is less active relative to gold and silver. Although the NYMEX, a part of the COMEX, offers platinum futures contracts that contribute to price determination and trading, the volume and liquidity in platinum futures typically lag behind those of gold and silver. 

In contrast, the LPPM plays a crucial role in establishing benchmark prices for platinum, notably through mechanisms like the Platinum Fix. This benchmark enjoys widespread acceptance in global transactions, thus exerting considerable influence on platinum pricing at a broader level. 

In summary, while the COMEX facilitates platinum futures trading, its impact on platinum prices is generally seen as secondary to the LPPM and NYMEX. Market participants closely monitor the LPPM's benchmark price and NYMEX's platinum futures contracts for price discovery and risk management within the platinum market. 

Platinum's Role in Automotive Applications 

Platinum has played a vital role in the automotive industry for many years, with reports indicating that over 80% of annual platinum supply is directed toward meeting the demand for cleaner transportation, particularly in the auto sector. This use spans various components, including spark plugs, catalytic converters, and ancillary industries like glass production. Catalytic converters, mandated in many countries globally, typically contain approximately 3 to 7 grams of platinum lining. This translates to around 9.6% to 22% of one troy ounce (0.0311 kilograms), being a value of approximately $92 to $211 at a spot price of $957 (current at the time of writing). Consequently, automotive companies may explore alternative metals such as palladium when platinum prices surge, and catalytic converters can become targets for theft due to their platinum content. 

Should Concern Arise Over the Electric Vehicle Revolution?

Some proponents of platinum express concerns about the potential impact of the electric vehicle (EV) market on long-term platinum demand, given the absence of catalytic converters in EVs. However, several factors suggest that this concern may be overstated. 

Firstly, it's essential to recognize that EVs cannot completely replace all vehicles currently on the road. The infrastructure for charging poses a significant challenge, with a single fast charger needing an expansive 40 acres of solar panels on a sunny day to fully charge an EV. Moreover, the power required to rapidly charge a semi-truck within thirty minutes is equivalent to that consumed by roughly 4,000 single-family homes, a technology still in development. Additionally, auto manufacturers are contending with the economic realities of EVs, as consumers show hesitancy to transition from gas vehicles due to higher initial costs, increased maintenance issues (up to 80% more), range anxiety, and lower resale values. Trends indicate a scaling back of forecasts and investments by auto manufacturers to align with market demand. 

The limitations and drawbacks of EVs suggest that they cannot entirely replace existing infrastructure. However, fuel cell electric vehicles (FCEVs) using hydrogen may present a practical alternative. Toyota has invested in this technology with the Mirai, although recent promotion has been minimal. FCEVs rely on platinum in significant quantities, and fleet vehicles are leading their adoption due to quick refueling times, absence of charging requirements, and favorable unit economics for refueling infrastructure. Moreover, the infrastructure needed for a hydrogen-based auto industry also depends on platinum. 

Platinum's Historical Performance

Platinum's Supply Dynamics

Platinum primarily derives its supply from recycling and mining, with recycling being crucial due to its rarity and the limited number of platinum mines globally. Platinum is approximately 30 times rarer than gold and is mined at about 1/15 the quantity of gold. Roughly 25% of platinum supply comes from recycling, while over 70% originates from mining operations in South Africa, highlighting a concentration risk. In 2023, South Africa experienced significant electrical grid failures, disrupting mining operations and reducing platinum supply. This trend is expected to persist, with consecutive supply deficits projected through 2027. 

Why Premiums are Important

All platinum bars, rounds, and coins carry a premium, a fixed percentage above the spot price, to cover costs throughout the supply chain. This premium is crucial for supporting a market for investment-grade bullion. Investors should expect to pay a slight premium above spot for platinum bullion. Beware of deals that seem too good to be true, as offers priced below spot may indicate counterfeit products. Exercise caution and skepticism when encountering such deals to avoid falling victim to fraudsters.