Platinum prices rise to two-month high

Platinum prices have risen to a two-month high in May, recovering from a 17-year low in mid-March, but the platinum-group metals (PGM) markets are likely to remain under pressure because of the Covid-19 pandemic.

Prices for 99.95pc min platinum steadily increased to $830/troy ounces (toz) yesterday, rising from a 17-year low of $621/toz on 19 March, according to assessments from UK specialty chemical producer Johnson Matthey (JM). Platinum prices were last below March 2020 figures on 6 May 2003, at $608/toz, JM data showed.

Prices for 99.9pc rhodium sky-rocketed to $13,800/toz on 12 March and plunged to $5,500/toz on 24 March. Prices recovered after another volatile April to reach $7,400/toz, JM data show. Palladium prices for 99.95pc min grade also jumped to multi-year highs of $2,805/toz in late February, before dropping to a six-month low of $1,612/toz in late March and reaching $2,060/toz yesterday, JM data show.

Temporary mine shutdowns to curb the spread of the coronavirus in countries including South Africa and the consequent disruptions to PGM-containing scrap resulted in tightening supplies, which pushed prices initially higher. But a sharp slowdown in the automotive, chemical, oil refining and glass manufacturing sectors because of distancing measures and the operation of only essential services hit PGM demand.

For example, producer Anglo American Platinum saw its total PGM production in South Africa drop by 7pc on the year to 954,800toz in the first quarter. The company attributed the production loss to shutdowns in mining operations implemented by the South African government and power generator Eskom's load-shedding.

But low platinum prices in March sparked buying interest, especially in China, which sought to lock in material at lower prices and boost inventories.

"The fall in platinum prices during March 2020 also triggered heavy demand for platinum ingot in China. With other supply routes temporarily disrupted, sales of platinum ingot on the Shanghai Gold Exchange (SGE) set an all-time monthly high. In total, over 10.6t (340,000toz) of platinum ingot was purchased by jewellery and industrial buyers, more than twice the previous monthly record," JM said in a report yesterday.

But the trend is unlikely to continue in the PGM markets including rhodium and palladium, which have reported a weaker price recovery in April and May, because of the persistent soft demand across the consumer markets globally. The latest forecasts point to a decline in light vehicle production and sales this year. Global light vehicle sales are expected to fall by 22pc to 69.6mn units, according to IHS Markit, with significant uncertainty over a meaningful recovery and potential downside.

In the case of rhodium, as tougher emissions restrictions were introduced around the world, demand surged amid a supply deficit stemming from the high cost of refining the product. Rhodium is mainly used in catalytic converters for gasoline vehicles to turn toxic nitrogen oxide emissions into harmless nitrogen and oxygen.

But with vehicle production stalling because of the lockdowns and social distancing measures along with lower sales amid weak consumer confidence, there is a potential downside risk in the rhodium market. JM also signalled a possible increase in PGM thrifting as a cost-cutting measure in the automotive industry amid high palladium and rhodium pries.

Furthermore, as sales of luxury goods such as jewellery that use platinum fall and as non-urgent medical procedures including dental, which use palladium-based alloys, are deferred, demand for these metals is expected to remain curtailed this year.

By Anuradha Ramanathan

Platinum 99.95% min $/toz

Rhodium, Palladium price trend in 2020 $/toz

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