(BFM Bourse) – Several metals have seen their prices fall recently, investors anticipating a drop in demand initiated by a return to recession in the global economy. But for Mirabeau specialists, platinum could stand out thanks to strong demand from the automotive industry.
Safe haven par excellence during the economic turbulence, gold has however lost its luster. The barbaric relic has lost almost 10% since January 1, suffering from the appreciation of the dollar which is the reference currency of the gold market. And the more the greenback strengthens, the more the purchase of the yellow metal is expensive. Investors are automatically turning away from this precious metal to take an interest in other assets.
Platinum has also suffered and is trading at lows since the summer of 2020. Yet demand is there for this noble metal. Heavier and stronger than gold, platinum is known to be used in jewelry to make “eternal” jewelry. The metal is also incorporated in minute quantities into anti-cancer drugs, or is even vital for the world’s oil supply. Without this precious metal, oil refineries could not produce enough fuel to meet demand.
The automotive industry, driving demand for platinum
But it is above all the automotive industry that consumes the most platinum since 43% of the world’s resources of this metal are used by this sector, recalls Mirabaud. The tightening of regulations on polluting emissions, which has resulted in an increase in the quantities of platinum per vehicle, should fuel demand.
“More than 40% of all platinum used in 2021 was used to reduce emissions in diesel car catalytic converters. The global drive to reduce emissions even further will likely see growth in platinum use,” recalls in a statement. notes John Plassard, director at Mirabaud & Cie.
“Some analysts predict that the global catalytic converter market could grow by 47% through the end of 2022, reaching a value of $55 billion. China could even further increase its platinum loadings in heavy-duty catalytic converters due to stricter emission standards” adds the specialist.
Two opposing forces
Platinum is caught in a vice between two opposing forces. Total platinum supply is set to contract by 8% this year, according to World Platinum Investment Council projections cited by the note. At the same time, demand for catalytic converters in China remains high, which is likely to support prices. The specialist nevertheless points to the strength of the dollar which stems from the “bellicose” tone of the American Federal Reserve. The greenback’s strength thus limited platinum’s rebound from the 26-month low of $830 reached on September 1. But for John Plassard, “the trend could be reversed.”
To invest in platinum, the specialist has identified several ETFs (listed funds that replicate the performance of an index or an underlying) including PPLT – the ETFS Platinum Physical Shares ETF or PLTM – First Trust ISE Global Platinum Index ETF .
Moreover, investing in a listed company specializing solely in platinum has become more difficult since the takeover of Stillwater Mining Company by Sibanye Gold in 2017. Mirabeau therefore cites diversified companies such as Anglo American Platinum (ADR)-(NYSE: VALE), Impala Platinum Holdings Limited (ADR)-(NASDAQOTH:IMPUY) or Sibanye Gold (ADR)-(NASDAQOTH:SGL SJ).
“It is difficult today to say that we should be interested in metals, because the recession that is coming its way will have an impact on demand. However, platinum could be an exception in the field since it depends on many other factors” concludes John Plassard.
Sabrina Sadgui – ©2022 BFM Bourse