Expect a rebound in the price of platinum

published 14 February 2014

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.

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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%.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.