The epidemic of catalytic converter theft should have been the most recent tell; but combining the recent supply shortage (the US Mint unable to meet platinum coin investment demand and South African mining issues) with demand hopes from a post-pandemic vaccine-supported industrial rebound (as well as an increasingly green global agenda against emissions) has sent platinum prices soaring in recent weeks, and much more so this week, to the highest since Jan 2015.
"The combination of supply losses due to pandemic-driven mine closures, ongoing South African processing disruption, and strong investment demand more than offsets lower Covid-19-impacted automotive, jewellery and industrial demand."
A perfect storm this week has seen the precious metal dramatically outperform its peers against a backdrop of dollar weakness...
Heavily used in catalytic converters - to reduce emissions from cars and trucks - Bloomberg notes that Palladium has been trading at a big discount to sister-metal palladium, which is also used primarily in catalytic converters. The price disparity between the two, as well as tougher regulations on emissions, has raised expectations that platinum will see greater use.
Notably, Platinum's shortfall of supply over demand came even as auto-catalyst consumption "plunged by 22%, with steep falls in European diesel car production," says technology specialist Johnson Matthey in its new PGM Market Report.
"Autocatalyst demand will recover strongly on higher car output and stricter emissions limits for trucks in China. Industrial consumption will remain robust, with PGM use in chemicals [manufacturing] set to reach an all-time high."
There are also pressures on the supply side, as BullionVault.com reports, South Africa's struggling power utility Eskom imposed a fresh round of electricity cuts - extending a run starting last Saturday - on households and business, running from 1pm through to 6am Thursday local time.
"The mining industry is heavily reliant on electric output," notes the precious metals team at French bank and London bullion market makers BNP Paribas, "and so is likely to suffer production slowness...That obviously translates into higher prices of PGMs today."
Looking ahead to 2021, "PGM supply and demand are forecast to bounce back in a V-shaped recovery," says Johnson Matthey's new report.
“Oil is going up and commodities in general are going up,” Johan Theron, spokesman for Impala Platinum Holdings Ltd.
“On a relative basis platinum is low on a historical level. So it’s definitely receiving a lot of investor attention and not necessarily that anything fundamentally has changed in the short-term outlook.”
Strong investment demand from those expecting a catch-up to gold and palladium also has been supportive, and today's CPI miss sparked more 'bad news is good news' support in the hopes that more stimulus will be delivered sooner, enabling even more of an industrial rebound.
“Optimism on the outlook for industrial and car demand, more stringent emission regulations and, in the last couple of days, some weakness in the dollar” have driven platinum higher, said Georgette Boele, senior precious metals strategist at ABN Amro Bank NV.
“Longer-term there is much more potential” for the price to rise, she said.