Expect a rebound in the price of platinum

Platinum prices, which fell by almost 20% in the past year, are set to recover. Unlike most metals, platinum isn’t well supplied: output in South Africa, which accounts for over half of supply, is continually interrupted by strikes.

The latest stoppage began two weeks ago, and unions and managements seem unlikely to agree on wage levels – which have been climbing across the sector – any time soon; 40% of global output is being lost to the strike every day. Electricity shortages and rising energy costs are also hampering production.

While the market is already in deficit and supply faces disruption, demand is recovering, says Capital Economics. Platinum is used in catalytic converters for diesel cars, making up 40% of overall demand.

Europe is the top market, as 45% of its cars are diesel-powered, compared to an average of 12% elsewhere. Car sales are likely to pick up this year after falling for six years as Europe’s economy recovers.

Platinum is also gaining market share in the jewellery sector (35% of demand).

Investment demand (6%), which comes mainly from exchange-traded funds, should remain steady. All this adds up to a bullish outlook for platinum, with Capital Economics forecasting a price rise of 20%.

Merryn

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