About Platinum (PL)

There are six major metals that comprise the Platinum Group: Platinum, Palladium, Iridium, Osmium, Rhodium, and Ruthenium. The most highly produced members of the Platinum group are Platinum and Palladium, which together account for more than ninety percent of the Platinum group production. All members of the Platinum group have the same basic metallurgic characteristics, such as excellent electrical conductivity, as well as being highly resistant to corrosion. Platinum alone is used for decorative purposes, often used in fine jewelry.

South Africa and the Ural Mountain region of the former Soviet Union are the major production areas for Platinum group metals. These two countries account for roughly eighty percent of world production, with South Africa being the larger producer. Colombia and Canada are minor producers of Platinum, though their importance as producing nations is growing as new supplies of platinum group metals are constantly being discovered.

Though increasing, known supplies of Platinum Group metals are relatively small. According to trade group information, known reserves of Platinum Group metals are estimated to be 2.3 billion troy ounces, or roughly 6 to 8 times the projected demand for the next twenty five years. This is a relatively tight supply situation, as compared to Silver, Copper and Gold which have known reserves to demand ratios in the mid teens, on average.

The main demand for Platinum Group metals is industrial. The automobile industry is the single largest user of Platinum, as the main ingredient in catalytic converters. The properties of Platinum allow it to break down harmful carbon monoxide, and hydrocarbon emissions into harmless oxygen and hydrogen gasses. The use of Platinum by the automobile industry has been steadily increasing, as governments around the globe, particularly in the United States, Europe, and Japan, have enacted stricter environmental exhaust emissions standards. Given current Platinum usage, the automobile industry accounts for roughly 75% of the Platinum used globally in any given year.

Platinum and Palladium are both used heavily by the chemical industry. Platinum is used as a catalyst in the production of nitric acid, and as an important element used to make explosives and fertilizers. In addition, Platinum and Palladium are used in the production of petroleum products, such as high-octane gasoline, and other various petroleum products.

Platinum is also used heavily in the production of electronic equipment. Due to its excellent conductivity, Platinum is used in the production of telephones, various other telecommunications equipment, as well as industrial controls and gauges. Though to a far lesser degree, Platinum is also used in the production of blown glass, pressed glass, and synthetic fibers. Platinum is also highly valued as an ornamental metal, but jewelry and decorative demand for platinum accounts for only roughly 1 percent of the total Platinum used in any calendar year.

Because of Platinum’s industrial usage, it generally sells at a premium to Gold. Though the two markets are highly correlated, Gold is not a good substitute for Platinum, at least as far as Platinum catalyst properties. Gold does serve, in a limited way, as a substitute for Platinum in some electrical assuages. Given Platinum’s unique metallurgic properties, Platinum typically sells at a premium to Gold, especially when industrial demand for metals is very high. Palladium, a member of the Platinum Group of metals, does share some of the qualities of Platinum, but is not nearly as efficient. More Palladium must be used to generate the same results as Platinum, for most uses, so its lower price is rarely incentive enough for Platinum users to switch to Palladium use. Silver, another industrial metal, which is also heavily used in electronics and electrical equipment, is very rarely used as a substitute for Platinum, due to its different metallurgic properties. Though most of the industrial metals have different properties, they all have a tendency to move in tandem with each other, due to the fact that they are all used for industrial purposes. As such, the same fundamental circumstances, such as gross domestic product growth rates and industrial production levels, effect each of the metals market to varying degrees.

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