Platinum Price Hits Record Discount to Gold
Wednesday, 11/22/2023 17:32
$1100 lower per ounce, nears 19th Century levels sub-50%...
The PRICE of PLATINUM has hit a record low against the price of gold, extending the last decade's deepening discount for the industrially-useful precious metal against its 'safe haven' cousin.
Rallying 7.0% last week from 14-month lows in US Dollar terms, the platinum price cut only $10 off the record discount to gold of nearly $1100 Troy per ounce set on Friday 10 November.
These new record discounts – set as
gold retries the $2000 level for a 5th time – have come despite rising demand for platinum from the auto sector and continued hopes for booming use of platinum-based fuel cells as part of the green energy transition.
Priced in the US Dollar, platinum has now traded $1000 or more below gold prices every day for almost 6 weeks, beating the run of $1000-per-Troy-ounce discounts seen 3 years ago.
Compared across history, that has pulled platinum's average price so far in 2023 back down to 50.0% of this year's average gold price, close to the 120-year low of 49.7% set during the Covid pandemic, lockdowns and economic recession of 2020 – the very cheapest since the start of the 20th Century.
With
platinum's No.1 industrial use currently coming for autocatalysts to reduce harmful emissions from internal combustion engine systems, demand from carmakers is on track to rise 13.8% this year from 2022, according to data from independent analysts
Metals Focus published this week by the mining industry's
World Platinum Investment Council.
Reaching the
largest total since 2016, that's being driven by increasing production of heavy duty trucks – almost always using diesel engines – plus substitution of more costly palladium for cheaper platinum in gasoline-engine vehicles.
Moreover, that growth in automotive platinum demand lags the wider 26.1% annual growth now forecast for total platinum demand in 2023, taking it to a 4-year high.
Platinum supply, in contrast, is seen at its lowest level since the global economy's Covid Crash of 2020. Down 2.5% from last year as a small rise in mining output is more than offset by a drop in recycling scrap, that will result in a record deficit of platinum supply versus demand this year, the World Platinum Investment Council says, with
another but smaller deficit predicted for 2024.
But with platinum miners "facing cash losses" on production that mean they "should be decommissioning producing mines and shuttering projects" according to US$32bn South African fund managers Coronation – which has now
quit its share investments in the sector – "Platinum miners continue to reposition for a lower price environment," says
a report from Heraeus, the German precious-metal refining company, produced by analysts SFA (Oxford).
Last month Anglo American Platinum (JSE: AMS) cut 140 corporate staff while Sibanye Stillwater (JSE: SSW) said it's looking to cut 4,000 jobs across its operations. Impala Platinum (JSE: IMP) then began offering voluntary redundancy to some of its employees in mid-November to try and reduce headcount at its mines in Rustenburg, north-west South Africa.
Platinum mining accounts for more than 1-in-3 of all mineral commodity jobs in South Africa.
In the European Union meantime, sales of new diesel cars have now fallen beneath sales of new battery-electric cars across 2023, dropping to
a market share of just 12.0% in October.
Diesel-engine vehicles accounted for 1-in-every-2 new passenger cars sold in Europe as recently as 2015,
year of the 'Diesel Scandal' over automakers cheating emissions tests to sell more polluting vehicles. Looking ahead, the
EU has banned the sale of new diesel or gasoline-fuelled vehicles from 2035, the same year that California – closely followed to date by many other US states on environmental policy – is
now targeting zero tailpipe emissions.
"I really hope I am wrong," said Amplats CEO Craig Miller to Reuters last month, "but the way I am setting up the business is that [these low] prices are in place for a bit of time."
But
platinum prices "seem to have fallen too fast too soon in our view," says analysis from Swiss bank and bullion market-maker UBS, "
particularly given the slowdown in EV penetration rates" into the US and Western Europe new car markets, with electric-vehicle maker Tesla (Nasdaq: TSLA) in particular seeing a "
shallower EV adoption curve than expected" according to Canadian bank RBC.
Most electric vehicles currently use lithium-based batteries, but "mounting social anger" against mining for the alkali metal in the US and Europe means "many
projects are going to really struggle to come online," says Neal Froneman, CEO of Sibanye – a major investor in Finland's Keliber lithium site but also the 3rd largest platinum producer behind Impala and Amplats.
"That will ultimately drive up the price of lithium and impact the cost of battery electric vehicles."
At the same time, "Plunging prices for platinum and other critical metals
could derail mining investment needed to develop new supplies," says the
Wall Street Journal, "posing a significant threat to decarbonization targets set by countries around the world."
"There was a five-fold increase in
fuel cell vehicle (FCEV) production" in Europe during the third quarter of 2023, the World Platinum Investment Council says in its latest demand-and-supply report. "However the total for the period was still a mere 300 vehicles.
"FCEV passenger cars currently contain between three to five times more platinum loadings than the average European diesel car" needs in its autocat system.
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