Analysts and dealers have slashed their estimates for platinum prices after a chip scarcity led automakers to reduce the manufacturing of platinum-containing automobiles containing the metal. Platinum prices recovered in October, after a dramatic dip in September. This recovery was possible mostly because its demand was bolstered by tighter automobile pollution rules.
An Analysis of the Recent Platinum Prices
In early September, the October contract for platinum traded on the Chicago Mercantile Exchange fell sharply as global car manufacturing was hampered by semiconductor shortages. Prices of Platinum declined 12 percent from $1,021 per ounce on 3rd September to around $899 per ounce on 20th September. The next day, prices reversed higher, going beyond $1,000 per ounce. On 21st October, platinum prices were observed at $1,040.40 per ounce.
Platinum began the early year at a price of $1,050 per ounce and climbed above $1,200 per ounce in February. It was marked as the highest in the last six years, and it was also on the strength of a resurgent automotive industry. Prices have now declined from this high as the platinum market has been constrained by car manufacturing constraints.
Increasing Demand and Supply of Platinum in 2021
Platinum is a critical component of catalytic converters, which transform hazardous pollutants and gases found in exhaust emissions into less dangerous gases. More nations have adopted higher automobile emission rules to fulfill environmental objectives. Therefore, the need for various autocatalytic converters has surged, resulting in a rise in the industrial usage of platinum.
Cells of hydrogen fuel generate energy without emitting any pollutants by mixing hydrogen and oxygen from the air over a platinum catalyst. A study by the World Platinum Investment Council found that globally refined supply is predicted to reach about 6.047M ounces this year, which is around 21% up from the last year.
The supply of different metals is predicted to return to approach 2019's levels in 2021 due to the recovery of South Africa after the major disruptions of the 2020s. South Africa is the greatest producer of platinum in the world, and the mining and refining activities in the country were badly harmed by the 2020 lockdown measures for Covid-19.
This year, platinum's demand has also been predicted to increase. Platinum is mostly used by the automobile industry, followed by chemical, glass, petroleum, electrical, medical, biomedical, and other industries and consumers. Like gold, platinum is a safe-haven metal that is utilized in jewelry.
According to the report, global demand for platinum is predicted to climb to 7.753M ounces in 2021, which will be a 1% increase up from the previous year.
By comparison, investment growth in platinum is predicted to slow to 110,000 ounces this year, which is 78% down from 2020 levels. Due to increased supply and decreased demand, the world platinum market supply is predicted to be in excess of 190,000 ounces in this current year, in comparison to a shortfall of 883,000 ounces in 2020.
Conclusion
Finally, according to some industry players, up to 1.5M ounces of extra platinum is going to be needed annually by 2025 in order to replace palladium in automobile and electric van models whose initial release predated the obligation to comply with new emissions laws.
