Platinum Jan '24 (PLF24)

Description

Platinum (atomic symbol Pt) is a relatively rare, chemically inert metallic element that is more valuable than gold. Platinum is a grayish-white metal that has a high fusing point, is malleable and ductile, and has a high electrical resistance. Chemically, platinum is relatively inert and resists attack by air, water, single acids, and ordinary reagents. Platinum is the most important of the six-metal group, which also includes ruthenium, rhodium, palladium, osmium, and iridium. The word "platinum" is derived from the Spanish word platina meaning silver.

Platinum is one of the world's rarest metals with new mine production totaling only about 5 million troy ounces a year. All the platinum mined to date would fit in the average-size living room. Platinum is mined all over the world with supplies concentrated in South Africa. South Africa accounts for nearly 80% of world supply, followed by Russia, and North America.

Because platinum will never tarnish, lose its rich white luster, or even wear down after many years, it is prized by the jewelry industry. The international jewelry industry is the largest consumer sector for platinum, accounting for 51% of total platinum demand. In Europe and the U.S., the normal purity of platinum is 95%. Ten tons of ore must be mined, and a five-month process is needed, to produce one ounce of pure platinum.

The second major consumer sector for platinum is for auto catalysts, with 21% of total platinum demand. Catalysts in autos are used to convert most of vehicle emissions into less harmful carbon dioxide, nitrogen, and water vapor. Platinum is also used in the production of hard disk drive coatings, fiber optic cables, infra-red detectors, fertilizers, explosives, petrol additives, platinum-tipped spark plugs, glassmaking equipment, biodegradable elements for household detergents, dental restorations, and in anti-cancer drugs.

Palladium (atomic symbol Pd) is very similar to platinum and is part of the same general metals group. Palladium is mined with platinum, but it is somewhat more common because it is also a by-product of nickel mining. The primary use for palladium is in the use of automotive catalysts, with that sector accounting for about 63% of total palladium demand. Other uses for palladium include electronic equipment (21%), dental alloys (12%), and jewelry (4%).

Rhodium (atomic symbol Rh), another member of the platinum group, is also used in the automotive industry in pollution control devices. To some extent, palladium has replaced rhodium. Iridium (atomic symbol Ir) is used to process catalysts, and it has also found use in some auto catalysts. Iridium and ruthenium (atomic symbol Ru) are used in the production of polyvinyl chloride. As the prices of these metals change, there is some substitution. Therefore, strength of platinum prices relative to palladium should lead to the substitution of palladium for platinum in catalytic converters.

Platinum futures and options and palladium futures are traded at the CME Group. Platinum and palladium futures are traded on the Tokyo Commodity Exchange (TOCOM). The CME platinum futures contract calls for the delivery of 50 troy ounces of platinum (0.9995 fineness), and the contract trades in terms of dollars and cents per troy ounce. The CME palladium futures contract calls for the delivery of 50 troy ounces of palladium (0.9995 fineness), and the contract is priced in terms of dollars and cents per troy ounce.

Prices - CME platinum futures prices (Barchart.com symbol PL) on the nearest-futures chart in 2023 closed the year down -7.3% at $995.0 per troy ounce. CME palladium futures prices (Barchart.com symbol PA) on the nearest-futures chart in 2023 closed the year down by -38.3% at $1,104.0 per troy ounce.

Supply - World mine production of platinum in 2023 rose by +3.4% yr/yr to 180,000 kilograms and remained well below the 2006 record high of 218,000 kilograms. South Africa is the world's largest producer of platinum by far, with 66.7% of world production in 2023, followed by Russia with 12.8%, Zimbabwe with 10.6%, and Canada with 3.1%. World mine production of palladium in 2023 was up +3.4% at 210,000 kilograms. The world's largest palladium producers were Russia with 43.8% of world production in 2023, South Africa with 33.8%, Canada with 7.6%, Zimbabwe with 7.1%, and the US with 4.7%. World production of platinum group metals other than platinum and palladium in 2022 fell by -10.2% yr/yr to 58,700 kilograms, below the 2005 record high of 77,700 kilograms.

US mine production of platinum in 2023 fell by -3.3% yr/yr to 2,900 kilograms, below the record high of 4,390 kilograms posted in 2002. US mine production of palladium in 2023 fell by -3.0% yr/yr to 9,800 kilograms, below the record high of 14,800 kilograms posted in 2002.

Trade - US imports of refined platinum and palladium in 2022 fell by -45.4% yr/yr to 197,700 kilograms. US exports of refined platinum and palladium in 2022 fell by -0.6% yr/yr to 111,720 kilograms. The US relied on imports for 83% of its platinum and palladium consumption in 2023.

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