Due to pandemic-related manufacturing interruptions, a rebound in vehicle use, and, in particular, rising interest in sustainable energy sources, worldwide platinum supply is likely to fall behind demand this year.
“The usage of hydrogen as a viable alternative to clean energy is gaining traction throughout the world, and it is helping to further carburize the environment,” said John Caruso, Senior Capital Manager at RJO Futures. “Green” hydrogen is produced by electrolysis of water, and platinum is utilized as a catalyst in the electrolysis process. Natural gas is used in “gray” or classic hydrogen generation.
Caruso believes that “the globe will make a big push in the coming years in the development of this technology,” and that “it may be time for the United States to fully embrace this” under a Joe Biden government. Biden has pledged to invest $400 billion in sustainable energy and innovation over the next ten years.
However, global platinum stockpiles are unlikely to be sufficient to fulfill demand. The predicted deficit in 2021 has been boosted by events in the third quarter, including “V-shaped recoveries in the automobile sectors, pandemic-related concerns increasing demand for investments in precious metals, and substantially decreased supplies.”
Wilson also mentioned that platinum is “critical in the creation of green hydrogen and in fuel cells for electric vehicles,” and that “material demand will rise over the next 5 to 10 years.”
“Green hydrogen is welcomed across the world,” Caruso said, adding that it is still in its early phases in the United States. He cites a project in Utah to build a green hydropower plant that is now under construction and will be one of the world’s largest “green energy reservoirs” when completed, he says.
According to the Hydrogen Council, renewable hydrogen generation costs around $6 per kilogram right now. According to the council, lowering the cost of green hydrogen generation to $ 2.50 per kilogram by 2030 may unleash nearly 8% of world energy demand. Green hydrogen can also provide 15% of world demand at a cost of $ 1.80 per kilogram.
According to the council, increasing demand for hydrogen requires a further drop in the price of renewable energy generally, relative to fossil fuels, as well as advancement and scalability of massive electrolysers.
Platinum pricing might be viewed as a bargain in this context. “Platinum has been left behind while many other precious and basic metals have made significant progress,” Caruso added. “We certainly experienced a significant slump in the automobile industry during the pandemic,” he says, referring to diesel-powered cars, where platinum is used as the principal metal for catalysts.
With multiple vehicle manufacturers’ emissions test problems, highlighted by Volkswagen, platinum already experienced a “major hit” in demand in 2015. The automaker admitted that it cheated on emission limits by using software. In 2015, platinum futures plummeted by more than 26%.
The metal market experienced a “cross-over” in the connection between platinum and gold in the summer of 2015, and prices haven’t looked back since, according to Caruso. He said that platinum has always been valued more than gold. Platinum futures were cheaper at the end of 2015, at $ 893.20 per ounce, compared to gold futures at $ 1,060.20 per ounce, according to FactSet data.
After a few years, gold is nearly twice as expensive as platinum, despite the fact that platinum is 30 times rarer and more difficult to mine, according to Caruso.
For the past three to four years, the platinum-to-gold ratio has been “out of sync,” with an average ratio of 1.25 to 1.5. It is now little under 1.75, implying that 1.75 ounces of platinum are required to purchase one ounce of gold.
