Trends in US, China spark hope for PGM prices' continued rise

There has already been a marked recovery in the price of platinum, rhodium and palladium this year, which has raised expectations that the worst is behind the industry after a dreadful few years. By Ed Stoddard

- Ed Stoddard

Some developments that have unfolded largely under the radar help to explain the bounce in the platinum price, which quietly hit a four-year high last week at more than $1,125 an ounce.

One is the decline of the platinum group metals (PGM) recycling industry in the US, the world’s largest. Like mining, this industry has been hard hit by the collapse of prices in recent years, which means there is less supply coming to the market from recycling.

The second trend is in China, where record gold prices have forced a hard pivot in the jewellery industry to platinum, which is now fetching a third of gold’s price, making it a bargain if you want to put a ring on it.

In an interview with Daily Maverick, Northam Platinum chief executive Paul Dunne sketched out these two trends and how they are potentially underpinning the price of platinum and other PGMs.

"Recycling, like mining, is very price sensitive," Dunne said. "It is not for free and a low price is a disincentive. When prices were high, every piece of scrap came back to the market. Now the scrap guys are not selling."

This scrap comes in the form of the catalytic converters used for capping harmful emissions (but not Co2). Platinum is heavily used in diesel engines, and palladium and rhodium are used in the petrol versions.

Just four years ago, when the PGM price basket was at record highs as rhodium surged to almost $30,000 an ounce, an average catalytic converter in the US containing four grams of PGMs went for $370. Now it’s fetching $33, and the scrapyards are seen to be holding off until prices rise again.