Platinum – Lies and Damn Lies

February 25, 2015 | By | Reply More

Shortly after the South African miners strike began last year causing the country’s platinum producers to close down for five months we read that above ground stocks would run out during May, some two to three months into the dispute.

With the expected shortfall in the worlds largest platinum producers many believed that the price would soar. After all motor vehicle production was recovering from the effects of the 2008 financial tsunami and the metal was an essential element in the manufacture of catalytic converters in exhaust systems. So what not to believe!

Turns out that the much publicised expected total depletion of stocks was a lie! After a temporary rally to $1496 an oz. in June 2014 it proceeded to tumble to around $1200 where it sits today. How many retail investors were sucked into going long platinum because of the misinformation being fed them by the producers and and publicised by the so called PGM (Platinum Group Metals) pundits ?

Now lets get up to date with what we believe is the truthful situation :-

  • Health research is showing that diesel engines cause more harmful pollution than gasoline engines. For example this has led to Paris, France, planning to ban all diesel cars entering the city by 2020. The London mayor is examining options to impose extra charges on diesel cars in congested areas. Now that the ball is rolling how many other cities/countries will join the band wagon ? The temptation to extract even more cash from motorists under the guise of health concerns will be overwhelming. The point is diesel fuelled cars need four times as much platinum as gasoline engines!
  • Platinum is used as catalyst in exhaust systems, meaning it is not destroyed or altered in any form and can therefore be recycled over and over again with no loss from scrapped vehicles. We learn that a major recycler is upping its game to recover more metal than ever.
  • While gasoline driven vehicles use some platinum, the expected growth in electric and hybrid cars which require no platinum in their exhaust systems, will again likely lead to a further progressive decline in platinum use.
  • Just yesterday we read of a discovery of an inexpensive substitute for platinum as a catalyst. Whether this comes to fruition is only a guess, particularly as we have learnt not to believe all that we read. Should it be true then the consequences for platinum are obvious.

Today the platinum price has reached its lowest for five years. Historically platinum has usually held on to a lead in price over gold, now it is trading below gold at the highest percentage wise spread for years.

Platinum producers, particularly in South Africa are faced with increasing costs with probably the most uncertain future outlook they have faced for many years. It is hard to believe that any increase in jewellery demand can compensate for the likely diminishing use of platinum in industry.

Yet again we read in the media that the jewellery industry in the US increased its demand for platinum by 60% in 2014 compared to the previous year. If you believe this together with a forecast for a further increase in 2015 then we suggest you back it up with some very rigorous research yourself.


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Category: Platinum Group Metals

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