by SignalFactory · February 10, 2021 | 12:11:57 UTC
Platinum rallied above $1,200 an ounce to a six-year high on bets that a recovery in industry and stricter emissions rules will tighten supply.
The price of platinum increased more than 3% on Wednesday as vehicle manufacturers across the globe focus on electric vehicle output after the Biden administration unveiled its plan to tackle climate change.
The Ford Motor Company is reportedly set to start production of its first fully electric car in Germany, while Nissan pledged to focus on building electric vehicles in the future. Meanwhile, the world’s leading EV manufacturer Tesla unveiled it is getting closer to finishing construction of its new research and development (R&D) center in Shanghai, the company’s first R&D facility outside the United States.
The white metal is used primarily in pollutant-cutting catalytic converters in cars, where it competes with palladium. The huge price disparity between the two, as well as the higher loadings demanded by tighter regulations on emissions, has raised expectations that platinum will see greater use.
“Optimism on the outlook for industrial and car demand, more stringent emission regulations and in the last couple of days some weakness in the dollar” has driven platinum higher, said Georgette Boele, a senior precious metals strategist at ABN Amro Bank NV. “Longer-term there is much more potential” for the price to rise, she said, noting the metal is cheaper than palladium and gold.
Platinum has outperformed its peers this year after spending most of 2020 lagging. The metal’s price outlook was improved significantly by disruption at a key South African refinery, which likely will drive the market into deficit this year, according to the World Platinum Investment Council. Strong investment demand from those expecting a catch-up to gold and palladium also has proved supportive.
Automotive demand is the single largest demand segment for platinum. Platinum has been used in autocatalysts for over forty years, with automotive demand the single largest demand segment for platinum, accounting for around 40% of annual platinum demand. As a result, investor sentiment towards platinum is heavily influenced by trends in the auto sector, which has had to overcome significant challenges, including the Dieselgate scandal, in recent times.
Last year, automakers were feeling the negative impact of the COVID-19 pandemic; in the first half of 2020, global light vehicle sales contracted 28% year on year, with European sales down 43%. Yet behind the headline data, and against a background of tightening emissions legislation around the world, a more detailed examination reveals several automotive themes, including resurgent diesel demand and substitution by platinum for palladium, that point to a more positive outlook for platinum automotive demand than auto sales data alone might suggest.
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