A persistent supply shortage in platinum has been a topic of discussion lately. Banks have reduced stockpiles in London as demand from Chinese buyers and the U.S. has increased, pulling metals off the market.
This surge in market activity has made platinum one of the standout performers this year, driving up prices of precious metals overall. Concerns about tariffs have led to a significant accumulation of metals in U.S. warehouses, while Chinese imports still aim to satisfy domestic consumption.
The situation has resulted in fewer trading hubs in places like London and Zurich, pushing traders to safeguard their supplies. While experts generally agree on the whereabouts of these metals, accurately determining the stock levels remains a challenge due to a lack of reliable inventory data in London.
“When the market gets this strong—good or bad, it’s a bit murky—it should draw resources out from where they’re hidden,” said Jay Tatham, who manages a metals fund at Valent Asset Management and has been optimistic about platinum for around two years. He pointed out that the current lease fee indicates ongoing market tension.
Currently, the implicit one-month lease rate is above 10%, slightly down from a peak of over 35% in July, but still significantly higher than the typical baseline. This figure reflects annual returns from lending platinum by holders in London or Zurich.
During this period, metals like gold and copper have been shipped to the U.S. as traders attempt to leverage market discrepancies influenced by tariff anxiety. The tensions surrounding platinum, however, appear particularly unusual.
So far this year, about 215,000 ounces have been withdrawn from Exchange Traded Funds, but New York warehouses have taken in nearly 290,000 ounces in just the last three weeks alone.
China, the world’s largest consumer, imported a staggering 1.2 million ounces in the second quarter. Although most metals are imported, shipments often exceed expected domestic demand, as noted by Standard Chartered PLC data.
Strict exporting regulations imposed by Beijing further cloud visibility regarding stockpiles.
Most purchases are led by China Platinum Co., a state-run entity that has the exclusive right to import without incurring a 13% VAT. This complicates the identification of the actual buyers behind each transaction.
China’s enthusiasm for stockpiling metals while managing crucial exports reflects its significant economic interests, yet it’s uncertain how much of this influx contributes to state inventories.
The upcoming introduction of the country’s first platinum futures could potentially heighten demand even further.
Borrowing Challenges
Major users of platinum include the automotive and jewelry sectors, but high borrowing costs have become a challenging issue for manufacturers relying on metals, spanning chemicals, glass, and lab equipment. Many industrial players prefer leasing options over outright purchases to avoid hefty costs.
Profit margins have surged into double digits, often leading to a complete evaporation of liquidity, as the pricing structure for most borrowers closely follows the fluctuating market.
“At one point, we saw lease rates shoot up to nearly 40%—that’s just an outrageous level for anyone borrowing metals as part of their business,” noted Ed Stake from the World Platinum Investment Council. “Pretty much everyone in the market has exposure to leasing costs in one way or another.”
On average, around $2 billion in platinum is traded in London, which is less than half that of the gold market, as reported by the London Bullion Market Association in April. This means that speculative investors and large hedge funds can exert substantial influence on the market.
Forecasting Deficits
Platinum’s impressive 45% profit this year follows years of sluggish price performance, particularly as the rise of electric vehicles threatens consumption of catalytic converters. The price has recently hovered around $1,320 an ounce.
Data collected for the World Platinum Investment Council reveals a growing market sentiment amid annual deficits for three consecutive years. The rising costs and supply interruptions in South Africa, the leading producer, are supporting bullish forecasts.
Craig Miller, CEO of Valterra Platinum Ltd., mentioned that the current price recovery allows about 90% of the mining sector to turn a profit, a notable increase from just 60% at the end of the last year.
“To encourage new production, prices would need to rise further, by about 50%,” he explained.
Such a rise could set the stage for a significant price rally, according to Marwan UNES, president of Massar Capital Management, who oversees a fund with about $1.6 billion in assets. “Finding the right triggers for market movement can be tricky because the structural conditions are optimal for explosive growth,” he said. “We remain very bullish on platinum.”
As Thomas Roderick, a portfolio manager at Thorium Capital LLP, observes, diminished supplies lead to increased desire for platinum. “When prices were falling, it created a self-fulfilling downward trend, but now there’s a genuine scarcity,” he noted.
