Modern Mining September 2023

PLATINUM

Platinum: Some headwinds for the white metal By Chief Investment Office GWM: Giovanni Staunovo, Strategist

W e retain a positive outlook for platinum as we expect the white metal to benefit from substitution in auto-catalysts in gasoline powered vehicles, away from palladium to platinum. Support should also come from our out look for a weaker US dollar and a higher gold price. We believe platinum will be in undersupply for the rest of this year due to substitution in auto catalysts and lower South African mine production. Hence, we expect the white metal to move back above $ 1 000/oz and continue to advise investors with a high-risk tolerance to add exposure or to sell the metal’s downside price risks. That said, we are closely monitoring two possible headwinds for the metal: fewer registered diesel-powered vehicles in Europe and a lower palladium price. We see a couple of challenges potentially limit ing platinum’s upside. Historically, the white metal’s main auto-catalyst market has been diesel-powered vehicles. However, in Europe, the share of diesel registered cars remains in freefall, with just 13.4% of newly-registered cars being diesel vehicles in June, down sharply from above 50% before 2017, reduc ing the need of platinum for auto-catalysts. The share is 15.1% for battery-powered electric vehicles, 36.3% for gasoline vehicles, and 33.2% for hybrid vehicles (which have a combustion engine and an auto-catalyst). The other headwind comes from palladium. In 2022, palladium used to cost about 2.5 times the price of platinum, supporting the rollout of the tri metal auto-catalyst. But that premium has narrowed to just 1.3 times currently. Should it erode further, there is a risk that substitution might slow down and

weigh on platinum demand. Over the longer term, we think hydrogen could compensate for that demand weakness, particularly if Europe is successful in its ambitious green hydro gen plans. However, hydrogen would not be able to compensate for the near-term weaker demand for auto-catalysts. 

Platinum will be in undersupply for the rest of this year due to substitution in auto-catalysts and lower South African mine production.

September 2023  MODERN MINING  13