Price Rises 14% This Month Alone
Supply Can't Keep Up with Increased Catalyst Demand... 1.2 Million Ounce Shortage Expected This Year
[Asia Economy Reporter Naju-seok] Platinum, used in eco-friendly energy instead of gold (a safe asset), is attracting investors' attention. While the popularity of gold has waned due to the development of COVID-19 vaccines, platinum demand is expected to increase as countries drive eco-friendly industries in the post-COVID era.
According to the London Metal Exchange on the 30th, platinum was priced at $970 per troy ounce (31.1g). The Wall Street Journal (WSJ) reported on the 27th (local time) that platinum was priced at $964.80 per troy ounce, marking an increase of over $5. In particular, platinum has risen 14% just this month, showing a price uptrend.
The rise in platinum prices can be called a "resurrection." Until 10 years ago, it was spotlighted as a catalyst for automobile exhaust purification, but later the automotive industry shifted to using the cheaper catalyst palladium, causing platinum to lose its place.
According to the World Platinum Investment Council, there was an oversupply of 310,000 ounces in 2017 and 795,000 ounces in 2018. Even earlier this year, platinum prices were sluggish. Due to COVID-19 reducing new car production, platinum demand also decreased, leading to oversupply.
However, the situation has recently changed. As the world focuses on eco-friendly energy, platinum has begun to be recognized as a catalyst, raising concerns about potential supply shortages.
Especially with the upcoming U.S. administration under Joe Biden emphasizing renewable energy, platinum is gaining more attention. For example, platinum is essential in hydrogen technology, as it is used as a catalyst in the process of splitting water into hydrogen and oxygen.
Not only the U.S., but the European Union (EU) and China have also announced carbon neutrality goals and are prioritizing investments related to hydrogen power generation.
Experts believe that platinum demand for hydrogen fuel cell vehicles will be more than four times that of diesel vehicles. Moreover, while palladium can be used as a catalyst for exhaust purification, only platinum can be used as a catalyst in hydrogen technology.
On the other hand, supply is actually decreasing. Platinum is mainly produced in South Africa, but production has significantly declined this year due to lockdown measures implemented to curb the spread of COVID-19 in the region. The World Platinum Investment Council expects platinum demand to exceed supply by 1.2 million ounces this year. WSJ reported that the COVID-19 situation has changed the platinum supply and demand dynamics.
Experts see platinum entering a major upward trend. Steven Dunn, Head of Exchange-Traded Funds (ETF) at Aberdeen Standard Investments, a UK-based asset management firm, predicted, "Platinum is now in the early stages of a long-term price uptrend."
The upward trend in platinum prices contrasts with gold prices. On the same day, gold was priced at $1,784 per troy ounce, marking its lowest level since July this year. In August, gold reached $2,050.2 per troy ounce (August 5), but it has fallen about 6% this month alone.
WSJ reported that the recent decline in gold prices reflects investors gradually shifting toward commodities like platinum that have greater potential for price increases.
Kirill Kirilenko, an analyst at commodity market information provider CRU, explained, "Following U.S. President-elect Biden's promise to invest $2 trillion (about 2,209 trillion won) in green energy, platinum prices have shown an upward trend in recent weeks. Besides investment demand, platinum is also used industrially, and with expected long-term growth in renewable energy demand, its price is likely to continue rising."
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