The price of platinum plunged more than 5% to touch $811.10 an ounce on New York futures markets on Monday, the lowest since July 2004.
Platinum is also trading not far off a record discount to sister metal palladium which was pegged at $938 an ounce, and to gold which also continued to slide on Monday trading at a new low for this year of $1,241 an ounce.
Platinum’s prospects have clouded significantly over the past couple of years.
The move away from internal combustion engines – particularly diesel-powered vehicles – is slashing longer-term demand for the metal.
More immediately the likelihood of a full scale trade war between the US and Europe over cars has seen hedge funds abandon the metal in droves.
On derivatives markets managed money investors such as hedge funds have cut bullish bets on platinum to record lows. Large scale speculators now hold the biggest net short position – bets that the metal can be bought cheaper in future – since government started collecting the data in 2006.
The autocatalyst market represent more than 40% of platinum end user demand and Europe’s car manufacturers where diesel made up around 50% of the market (but as a percentage of new sales has plummeted) are the top industrial consumers of platinum.
Palladium mainly finds application in gasoline engines, platinum is the preferred emissions scrubber in diesel engines. Diesel technology has been under relentless pressure since the September 2015 revelations that Volkswagen, the world’s number two vehicle manufacturer, had cheated on emissions testing.
Threats of duties on vehicle imports over and above steel and aluminum tariffs already imposed by the US on the EU would have an immediate effect on platinum demand. The European bloc exported $43.6 billion of cars to the US in 2017, while $7.2 billion worth of cars went the other direction.
Together Russia and South Africa control between 70% and 80% of the world’s supply of PGMs. Russia’s state stockpiling organization called Gokhran sits on an undisclosed amount of palladium built up during the Soviet era, which it releases onto the market from time to time (some say it’s already depleted).
The structure of supply has not altered in any substantial way since the 1970s when platinum and later palladium came to the fore as an important part of the world’s automobile industry.