The big metal bet on recovery, green tech

The post-pandemic recovery is doing great things for platinum prices, and they may well go higher still on the strength of climate concerns, since platinum, as we are reminded in the latest quarterly report from the World Platinum Investment Council (WPIC), plays a big part in green technologies. During the first quarter of 2021, with widespread stimulus measures impacting the economy, demand for platinum increased by 26% year-on-year, to 1,969 koz (thousand ounces). The CTA community has a big bet on the ongoing post-COVID economic recovery, especially in the period since good news from COVID vaccine researchers started making headlines late last year. As Max Layton, managing director for commodities research at Citigroup, told Bloomberg earlier this month, the humans involved didn’t necessarily know why they were doing it, their algorithms were making the calls, but they happened to make the right ones. Looking specifically at platinum, the metal hit a historic high, above $2,000 oz, in March 2008. The global financial crisis drove it down to less than half of that by the end of that year, a loss it (mostly) regained by early 2011. But there followed a slower bear run, caused in large part by changing practices among automobile manufacturers. Platinum is one of the metals used to neutralize automobile emissions in catalytic converters, along with palladium and rhodium. The percentage of platinum use for this purpose gradually declined throughout the period 2010-2020, and platinum value fell in parallel, though it has spent most of the time since January 2016 within the range from $800 to $1,000. In 2021, platinum has busted out of that range on the upside. It passed $1,000 on December 1, 2020 stalled around $1,100 until early February, and then moved to a better neighborhood. It is now trading between $1,200 and $1,250. “We now see growing momentum and economies shifting through the gears,” of the global economy, according to Paul Wilson, CEO of the WPIC. Platinum is critical to the green hydrogen agenda, which is seeing increased stationary fuel cell development and the early production of green hydrogen from renewable electricity. Holdings of platinum by exchange traded funds grew for the fourth consecutive quarter in Q1 2021, even though some speculators (especially in Japan) capitalizing on recent price strength, sold back to the bar and coin sector of the market, producing a fall in demand there. Japanese interest in that trade was piqued when platinum exceeded the 4,000 Yen per gram level. Much is expected of the jewelry sector. Platinum jewelry is expected to grow 9% from 2020, to 1,978 koz, which will place it close to the 2019 level. Strength in this sector is coming especially from the North American, European, and Indian markets.

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The big metal bet on recovery, green tech

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Christopher Faille

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Christopher Faille

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