Platinum price prediction for 2020 and beyond

Denser and rarer than gold, platinum is one of our favourite materials for use in healthcare and car manufacturing. But what is the platinum price forecast for 2020?

Like all commodities, platinum’s price is dependent on a complicated mixture of demand – particularly from industry – and levels of supply in the market.

So what is the platinum price forecast for 2020? In recent times, its industrial applications have seen a fall in demand. There are some suggestions that new technologies, in particular electric vehicles and small satellite manufacture, will require greater quantities of this precious metal in the future.

At its peak, platinum was more than twice the price of gold. So what are the price predictions for platinum in future?

A rocky ride

Historically, platinum reached its all-time high of $2,253 per oz in March 2008, up from its lowest point of $97.70 in January 1972. Its latest peak was in August 2016 when it reached $1,157.97. The most recent platinum commodity price as of December 11, 2019 is $920.13, after starting this year at a level of $799.54.

By past standards, platinum is having a good year. It has increased by over 15 per cent since January. As a vital component in fuel-cell batteries, platinum could be a key component in the electric cars of the future, making up for declines in traditional car manufacturing and a sluggish jewellery market.

Platinum price forecast 2020

Demand for a new generation of cars that use a fuel cell instead of a battery is likely to come in the medium term as the technology takes off. Platinum is also a key component in small satellites, which are increasingly being used by government and industry.

For investors interested in buying the metal, there is short-term uncertainty. Demand for platinum in 2020 is forecast to drop, and there is likely to be a surplus of the metal.

What’s more, the share price of platinum has been languishing for nearly a decade, prior to this year’s better performance. Even in 2019 it has underperformed the two related metals with which it is mined. Palladium and rhodium are produced as by-products of platinum mining, but the price of palladium has jumped 41 per cent in 2019, while rhodium has surged 144 per cent, as both are in high demand for industrial uses.

Uses of Platinum

Platinum is mined in South Africa and has a number of important industrial uses. While it is a scarce metal, more than 20 times rarer than gold, it is used primarily in:

  • MANUFACTURING: According to the World Platinum Investment Council (WPIC), Platinum’s versatility keeps it in demand. Industrial use of platinum has increased nearly fourfold since 1980.
  • HEALTHCARE: Platinum is a biologically compatible metal because it is non-toxic and stable. It does not react with, or negatively affect, body tissue. It is used in surgical instruments, implants, pacemakers and cancer treatment.
  • ENVIRONMENTAL: Platinum’s properties make it critical to reducing air pollution and in the construction of energy-efficient fibreglass.
  • CATALYTIC CONVERTERS: these convert toxic gases and pollutants from internal combustion engines into less-toxic pollutants by interaction with the surface of platinum.

The demand for platinum in the car industry has been hit by falling demand for diesel cars. Petrol cars, which use palladium in the manufacturing process, have become more popular after the EU introduced tighter restrictions on polluting cars and diesels fell out of favour.

In addition the scandal of 2016, when Volkswagen was found to have tampered with diesel-powered vehicles in order to produce better emissions tests, has cast a shadow on the diesel car industry. The platinum prediction is that manufacturers may, in time, decide to use platinum in petrol vehicles rather than palladium, as the latter is now so expensive in comparison. However, this change could take between two and five years to materialise.

Political and economic risk

Almost 75 per cent of platinum is mined in South Africa. These mines have been affected by disputes over pay and working conditions, lack of power and water, and the instability of the rand.

For several years, South African platinum miners have been in the red and their mines have not been particularly profitable. The decrease in the value of the rand compared with other world currencies, coupled with strong demand for palladium and rhodium, have put them back into profit. These days, they are known as Platinum Group Metals (PGM) producers, rather than platinum miners because of the importance of palladium and rhodium in the mining process.

Is platinum a good investment?

While 0'>palladium is the metal of choice in petrol and hybrid catalytic converters, systems could be re-designed so that platinum could take its place. While the cost to do so would be high, with palladium now costing twice as much as 0'>platinum at over $1,872 an ounce, there may soon be a financial incentive for car manufacturers to make the change.

Platinum price forecast

So, what about the platinum forecast for 2020, and beyond?

Experts are divided on the outlook for platinum. René Hochreiter, a respected analyst with Noah Capital, said earlier this year that the outlook for PGM miners was “better than it has been for many years”.

However, Johnson Matthey’s most recent PGM Market Report suggested that while the outlook for investment, industrial and automotive demand is largely positive, this is less true for the jewellery sector. Young consumers, particularly those in China where the market is growing, are less swayed by the rarity of platinum, and more motivated to buy gold jewellery with attractive designs.

According to a report by RMB Morgan Stanley, platinum’s future price will depend on industrial demand in the long term, rather than investors’ decisions to hold it as an asset as they do with gold. Platinum is less liquid than gold, which also makes it problematic to hold as an alternative asset that is a safe haven and not correlated to the performance of financial markets.

According to the World Platinum Investment Council (WPIC) there has been a recent growth in Indian demand for platinum jewellery and this could put upward pressure on platinum prices in the coming years as India’s economic growth catches up China’s.

Platinum price outlook

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In August 2019 an analysts’ report from Capital Economics forecast that a weaker South African rand coupled with the high prices of by-products at platinum mines would mean that the price of platinum stays firmly in the doldrums over the next couple of years.

Investing site Wallet Investor has a negative outlook, forecasting the commodity to peak in April 2020 at $995 and be worth an average of $868 by the end of 2020, lower than today’s price.

What does the future hold?

The World Platinum Investment Council is upbeat about the future of the metal. It says platinum’s attraction as an investment asset arises from:

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  • Supply is relatively constrained with limited investment in new mines
  • The platinum price is at all-time low relative to gold and palladium
  • In the future platinum may be used as a substitute for more expensive palladium
  • Investment demand has increased because of platinum’s low price and positive outlook

“Investment demand in 2020 remains strong but is well below the record level in 2019 and despite a fall in mining supply will still result in a sizeable surplus in 2020,” its most recent report says.

“We believe the sustained palladium price premium over platinum in 2019 (that has averaged $839/oz since the start of Q4) has increased the likelihood of early substitution becoming visible. Interest in platinum investment has become more widespread.”

In September 2019, Trevor Raymond, director of research at the council, said in an interview with Miningmx that there was “no reason” why platinum should trade at a discount to gold.

Platinum price predictions

The WPIC forecasts that the 2020 supply of platinum will be 1 per cent lower with a 2 per cent decline in mining and a 1 per cent increase in metal recycling.

Demand in 2020 is forecast to fall in the automotive (-3 per cent) and jewellery (-2 per cent) categories but increase by 2 per cent in the industrial category.

Paul McFadyen, Managing Director of metals4U, the UKs largest online retailer of metals, says that predicting the value of platinum over the next 12 months is complex due to its dynamic and evolving uses.

Platinum has traditionally been around one third more expensive than gold, predominantly due to it being a rarer commodity and less frequently mined. Paul McFadyen

However, currently the market is showing gold to be enjoying a period of high market price while platinum is experiencing one of its lowest sale values for some time. Paul McFadyen

Around 76 per cent of annual demand for platinum comes from the automotive and jewellery industries, but this could be about to change. The majority of demand within the automotive industry is for the manufacture of catalytic convertors, but this is in decline as the eco-ethos of the diesel engine shifts under new fossil fuel usage regulations and the rise of the electric car. Paul McFadyen

McFadyen says in terms of jewellery demand, reduction in spending for weddings is also predicted for 2020 due to “domestic” budget constraints. Although businesses can plan for Brexit fallout to some degree, individuals cannot.

Platinum is pricey for jewellery when compared to titanium, and stainless steel is rising in popularity within the jewellery design industry due to its cost and durability, so platinum may take a back seat for a while in the luxury market. Paul McFadyen

Nevertheless, other market areas are experiencing growth, and this may push up the price of platinum.

“The future of platinum is looking bright as other market areas are experiencing development and growth,” McFadyen says. “The use of platinum within the chemicals industry, electronics, avionics, and glass manufacturing industries for example will maintain their demand for the precious metal.”

An area of growth and development that is really exciting for the platinum supply market is the increased demand within the manufacture of satellite apogee engines.

Platinum is used in the high stress components such as the combustion chamber and the throat of the nozzle as it can withstand the 1,400°C temperature for several hours.

The small satellite market is predicted to be £5.94bn industry by 2022 with leading industry and government stakeholders making investments.

Although the more ‘traditional’ uses for platinum may be in decline, I predict that the value of platinum will increase and be maintained within newer industry demand McFadyen says

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