Chinese refiner seeing strong platinum demand from new contract

A major Chinese metals refiner is seeing a large volume of demand for platinum to deliver against a new local futures contract, a sign of how the product is luring more of the metal into the country.

“Many speculators and industrial clients holding short platinum positions are choosing physical delivery” as the more profitable option than closing positions, said Wang Yanhui, general manager at Shenzhen Yuexin Precious Metals Co. Ltd. Many have captured the spread between the spot price in London, where the international benchmark is set, and the domestic exchange, he said.

Guangzhou Futures Exchange launched China’s first platinum futures late last year, attracting substantial interest from local speculators and driving prices to a premium over international prices.

The increased Chinese demand is likely to tighten international supply of the precious metal, particularly as Beijing has long maintained restrictions on exports. Global prices of platinum — which also has industrial uses — have more than doubled over the past year.

A big part of the enthusiasm has been concentrated in the benchmark contract for June delivery, and there are signs that investors are buying platinum ahead of the contract expiring, Wang said.

As of the end of last week, there was around 14.4 tons of open interest for the platinum futures contract for June delivery, with around 600 kilograms of warehouse inventories on warrants, data from the exchange shows. China Platinum Co., a state-owned trader, holds most of the stockpile.

The relative low level of inventory “underscores the need for physical platinum” and demand likely will stay elevated as the nearest contract approaches expiry, Wang said.

Shenzhen Yuexin is one of the biggest precious metal refiners in China, producing around 200 tons of gold and 20 tons of platinum last year. “Many clients are asking to sign long-term contracts with us,” in order to secure supply of platinum in the future, Wang said, adding that these are still under consideration.

(By Yihui Xie)