How The Platinum Trade Works – The Beginner Trader’s Guide For 2021


Why is Platinum Valuable & What Factors Play a Role in the Price of Platinum?
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This platinum precious metal guide explains the value behind platinum and what the metal is primarily used for in commercial industries. We explore whether platinum is a rare commodity, how it’s produced, and which countries have the largest platinum reserves in the world.

Read on to find out why South Africa’s economic health has a significant impact on platinum, and what other factors drive platinum prices.

Interested in how platinum is traded? See our full guide, or if you want to get started trading right now, here are options available in to consider:

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Why is Platinum Valuable?

Platinum is a rare chemical element found in the Earth’s crust. The greyish-white metal is one of the most intriguing commodities because its user base defies simple categorization.

Business sectors such as the automotive industry demand platinum for use in catalytic converters, while investors covet the metal as a financial asset and store of value.

Jewelry buyers seek platinum for its beautiful shiny appearance and resistance to tarnishing.

What Is Platinum Used For?

Most of the industrial applications for platinum were developed after the 1970s when air quality laws required catalytic converters on automobiles.

The following industries generate most of the demand for platinum:

Use Description
Automobile Industry



The automobile industry accounts for almost 40% of gross demand for platinum. Automobile manufacturers use platinum in catalytic converters to control harmful exhaust emissions.
Jewelry


The jewelry industry accounts for over 30% of the global gross demand for platinum. The metal’s shiny appearance and resistance to tarnishing make it a popular choice in rings, necklaces, bracelets and watches.
Industrial Uses

magnet
Industrial uses account for almost 25% of global gross platinum demand. Products that use platinum include the following:

Oxygen sensors
Spark plugs
Turbine engines
Dentistry equipment and dental crowns
Anti-tumor agents
Standard weights and measures
Magnets
Investment Demand

Silver Money
Investors account for about 5% of global gross demand annually. Countries including the United States, Canada, Australia, Isle of Man and China, mint platinum coins for investors. Investors can also purchase platinum bullion in the form of bars and ingots.

How Rare Is Platinum?

The list of uses for platinum makes its comparison to gold seem obvious.

However, by some measurements, platinum is even rarer than gold. Miners extract only about 130 million tons of platinum from the ground annually compared to more than 1,700 tons of gold.

Platinum mining is also far less efficient than gold mining. The process of extracting the metal from ores can take five to seven months and may require ten tons of ore to yield one ounce of platinum.

The cost of mining an ounce of platinum is nearly twice that of mining an ounce of gold.

How Is Platinum Produced?

Platinum is a dense metal that is also malleable and ductile. It is extracted from ore bodies in mines that contain the platinum group elements (PGMs).

These elements – platinum, iridium, osmium, palladium, rhodium, and ruthenium – all have similar chemical, physical and anatomical properties.

Miners generally extract platinum from placer deposits, which are naturally occurring concentrations of heavy minerals. These deposits accumulate as a result of the effects of gravity on moving particles.

Platinum miners also extract the metal from sperrylite and cooperate, which are ores that contain platinum. Recycling scrap metal also provides a portion of the metal’s annual supply.

Top Platinum Mining Countries

Biggest Platinum Producing Countries

Annual mining of platinum totals hundreds of thousands of kilograms. This number has declined steadily in recent years as mining companies have cut back on production and closed mines due to low prices.

The Bushveld Complex in South Africa contains the largest reserves and supplies over 75% of the global output.

RankFlagCountryMine Production (Kilograms)
#1Flag of South AfricaSouth Africa120,000
#2Flag of RussiaRussia23,000
#3Flag of ZimbabweZimbabwe13,000
#4Flag of CanadaCanada9,000
#5Flag of USAUnited States3,900

Which Countries Have The Highest Platinum Demand?

The US imports 18.5% of all globally exported platinum, while Japan imports 11.8%. Germany is responsible for 15.3% of palladium imports and the UK purchases 12.7% of the world palladium supply annualy.

China represents close to 6% of the total annual demand for platinum. Gross demand includes the amount generated from recycling platinum.

Source: OEC

Which Countries Have the Largest PGM Reserves?

PGM reserves are a measure of the quantity of economically mineable metals in the ground. South Africa has more than 90% of Earth’s PGM reserves.

However, mining is an expensive endeavor, and, ultimately, the price of the metals determines whether it is feasible to mine them.

RankFlagCountryReserves (Kilograms)
#1Flag of South AfricaSouth Africa63,000,000
#2Flag of ZimbabweZimbabwe1,200,000
#3Flag of RussiaRussia1,100,000
#4Flag of USAUnited States900,000
#5Flag of CanadaCanada310,000

What Drives the Price of Platinum?

Platinum has unusual anomalies on both the supply and demand side of the equation.

Historically, its demand derives from both traders and industry, which makes it similar to gold and silver, but different from almost all other commodities.

The following five areas are significant determinants of platinum prices:

  1. South African Economy
  2. Health of Global Auto Industry
  3. Electric Vehicle Development
  4. Changes in Catalytic Converter Technology
  5. Investment Demand

Ready to start trading platinum? Learn what types of instruments you can trade the commodity with and where you can find regulated brokers in our Platinum Trading Guide.

South African Economy & Palladium

In addition to producing more than 75% of the global annual output of platinum, South Africa accounts for 95% of the world’s proven reserves.

COSATU State Capture Protest via Discott on Wikimedia
COSATU State Capture Protest via Discott, CC BY-SA 4.0, via Wikimedia Commons

As a developing nation, South African markets are volatile and unpredictable. Events including labor strikes and political unrest have the potential to slow down production at mines.

In addition, economic events and the manner in which politicians respond to those events can impact supply. Taxes, nationalization of assets, and restrictions on land use all have the potential to impact mine output.

Global Automotive Industry Development

Catalytic converters account for nearly 40% of global gross platinum demand. Therefore, trends in the auto sector impact the price of the commodity.

Platinum prices tend to perform best when the auto industry is healthy and tend to slump when it is struggling. 

Trends in environmental laws can also impact platinum prices. As developing nations pass stricter air quality laws and emission standards for vehicles, platinum prices should respond positively.

Ultimately, the health of the auto industry mirrors the overall economy, so strong economic growth bodes well for platinum prices.

Electric Vehicle Development

Tesla Auto Bots via Steve Jurvetson on Wikimedia
Tesla Auto Bots via Steve Jurvetson, CC BY 2.0, via Wikimedia Commons

Advancements in the development of electric vehicles and demand for these vehicles could depress platinum demand.

There are several factors that impact demand for electric cars including the price of oil and the implementation of stricter air quality laws.

Changes in Catalytic Converter Technology

Technological advances in the way automakers reduce exhaust emissions could impact platinum demand.

The relatively high price of platinum may incentivize auto manufacturers to seek alternative technologies. Palladium now replaces a portion of the platinum used in catalytic converters.

If these technologies improve, then the demand for platinum might further erode. Ultimately, the high price of platinum may hasten these changes.

Platinum Investment Demand

Demand for trade represents a small percentage of overall annual demand. However, weakness in the US dollar and the high cost of gold could lead consumers to substitute investment dollars into platinum.

Brokers: Where To Trade Platinum

Interested in trading commodities like Platinum? Start your research with reviews of these regulated brokers available in .

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 53.00%-83.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Further Reading

Learned enough about how platinum is produced and what it’s used for? See our Guide To Platinum Trading.

If you’re interested in other precious metals, see these guides on:

  • How gold is mined and who has the most
  • What silver is used for in commercial industries
  • Which automotive component palladium is used to create

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