Gold 0.21%
£3,367.14 OZ
Silver -2.37%
£51.17 OZ
Platinum -0.49%
£1,358.32 OZ
The Silver Britannia is capital gains tax free in the UK, making is a very popular choice with UK investors
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The platinum market has long been characterised by its cyclical nature, with periods of surplus and deficit shaping the landscape for holders of Platinum. The price of Platinum at the end of 2024 is at the same price that it was in 2015, showing very little progress in nine years despite all the currency debasement that was seen inbetween. Platinum is also historically low against Silver. What is causing Platinum’s low price problem?
To really understand why the price of Platinum is so low a historical audit of market balance and above-ground stocks needs to be conducted. The surplus/deficit of the market shows how balanced supply and demand is whilst above-ground stocks, measured in thousands of ounces, play a critical role in this ecosystem, serving as a buffer during periods of deficit and reflecting the market’s health.
Deficits deplete above-ground stocks as demand exceeds supply, while surpluses replenish reserves when supply outpaces consumption. For example, in 2013, the market faced a deficit of -750 koz, resulting in above-ground stocks of 3,390 koz. By 2016, sustained deficits reduced these stocks to just 1,740 koz, underscoring the market’s struggle to meet demand.
Platinum’s low price problem at a glance:
Deficit and Surplus Trends: The platinum market has experienced alternating periods of deficit and surplus between 2013 and 2024, with deficits leading to declines in above-ground stocks and surpluses replenishing them. Key deficit years include 2013-2016 and 2020, while surpluses in 2017 and 2021 provided temporary recoveries.
Supply Challenges: South Africa, the largest producer of platinum, has faced recurring operational disruptions such as electricity shortages and labor strikes, limiting supply. Recycling constraints have further compounded supply issues, especially during the 2019 pandemic.
Evolving Demand: Automotive demand has been a major driver of platinum consumption, supported by the rise of hybrid vehicles and platinum-for-palladium substitution. However, semiconductor shortages and the gradual transition to electric vehicles have influenced demand fluctuations.
Role of Above-Ground Stocks: Above-ground stocks act as a crucial buffer during deficit years, ensuring supply continuity. However, speculative stockpiling, particularly in China, and sustained deficits have led to significant stock drawdowns in recent years.
Future Outlook: Persistent supply challenges and steady demand are expected to maintain market volatility. Above-ground stocks are projected to decline further in 2023 and 2024, potentially creating upward pressure on platinum prices. Industry and investors must monitor these trends closely.
The platinum market is influenced by a combination of mining production, recycling and demand from sectors like automotive, jewelry and industry. Mining production, particularly in South Africa, dominates the supply side. However, frequent operational challenges such as labor strikes and electricity shortages have limited output over the past decade. Recycling also plays a significant role but remains highly variable, often constrained by factors like reduced availability of end-of-life vehicles and supply chain issues.
Demand has evolved significantly over the past decade. While traditional uses such as jewelry have remained relatively stable, the automotive sector has emerged as a major driver of platinum consumption. The growing adoption of hybrid vehicles and platinum’s substitution for palladium in gasoline engines have bolstered demand. For instance, automotive platinum demand increased year-on-year by 12% in 2022, despite supply chain challenges affecting vehicle production globally.
The years between 2013 and 2024 highlight how surplus and deficit years directly affect above-ground stocks. For instance, deficits in 2013 (-750 koz) and 2014 (-810 koz) drove stocks down from 3,390 koz to 2,225 koz by 2015. These deficits were largely due to supply disruptions in South Africa mines and limited recycling.
However, in 2017, the market recorded a modest surplus of +140 koz, marking the beginning of a short recovery phase. Above-ground stocks increased slightly to 1,880 koz. This trend continued into 2018, with a surplus of +675 koz driving stocks to 2,555 koz.
The situation shifted dramatically in 2020 when the market recorded its largest deficit of -932 koz. This deficit was driven by 2019 lockdown related disruptions, which caused mine closures and limited recycling. Above-ground stocks fell to 2,728 koz, their lowest level in several years.
In 2021, the market rebounded with a surplus of +1,392 koz, primarily due to the accelerated processing of Anglo American Platinum’s semi-finished inventory. Anglo American is the largest Platinum producer in South Africa hence its influence on the market during this period. Above-ground stocks surged to 4,119 koz. However, this surplus also reflected reduced automotive demand caused by semiconductor shortages, which limited vehicle production and, by extension, platinum consumption.
By 2023 and 2024, deficits returned, driven by ongoing supply challenges in South Africa and Russia, as well as persistent recycling constraints. Above-ground stocks declined to 3,553 koz by 2024, highlighting renewed supply pressures.
Above-ground stocks serve as a critical buffer in the platinum market. They provide stability during deficit years by meeting excess demand and offer a reserve for industrial and investment needs. The decline in stocks during deficit periods, such as 2013-2016 and 2020 reflects the strain on supply chains and the growing importance of alternative sources like recycling.
Conversely, surplus years like 2021 and 2022 allowed stocks to recover which offers a degree of market stability. However, speculative behavior, particularly in China, has added complexity to the relationship between market balance and stock levels. In 2021, for example, despite a global surplus of +1,392 koz, Chinese market participants absorbed much of this surplus through speculative stockpiling, limiting the impact on global above-ground stocks as has been seen with other commodities such as copper.
The platinum market’s balance directly impacts above-ground stocks. In years of surplus, stocks grow as supply exceeds demand, creating a reserve for future use. Conversely, in deficit years, these stocks are drawn downvreflecting tightening market conditions.
However, this relationship is not always straightforward. Factors such as speculative activity, macroeconomic trends, and recycling variability can disrupt the expected interaction between market balance and stock levels. For instance, the sharp rebound in stocks in 2021 was driven more by inventory processing than by a fundamental increase in supply or reduction in demand.
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Looking ahead, the platinum market is poised for continued volatility. Supply constraints in South Africa, driven by persistent electricity shortages and infrastructure challenges, are likely to limit production. Recycling rates, although expected to improve, will remain below pre-pandemic levels due to reduced availability of scrap vehicles.
On the demand side, the automotive sector will continue to play a pivotal role. While the transition to electric vehicles may reduce long-term demand for platinum in catalytic converters, the near-term outlook remains strong due to the growing adoption of hybrid vehicles and increased platinum-for-palladium substitution.
Above-ground stocks will remain a key indicator of market health. As deficits are projected to persist in 2023 and 2024, these stocks are expected to decline further, potentially creating upward pressure on platinum prices. Investors and industry stakeholders should closely monitor these trends to navigate the complexities of this evolving market.
Investing in Platinum Bullion
Platinum is less accessible in the UK bullion market but can usually be sourced relatively easily. Auornum is an active supplier of low-premium Platinum bars and coins
