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China’s growing love affair with Platinum and its implications for U.S. policy

“It happens to all commodities. At one time or another, China falls in love with you and barring a drought or striking miners somewhere, your price becomes dependent on Chinese mood swings” – that’s the conclusion drawn by Forbes contributor Kenneth Rapoza, who zeroes in on China’s growing love affair with Platinum.

An extremely rare metal – with a concentration of only 0.005 parts per million in the Earth’s crust – Platinum is not only one a valuable precious metal used for adornments, some of its key properties – ductility, durability, malleability and a very high melting point make it a sought-after component of a broad range of applications. One of its main uses is in the manufacture of catalysts used in diesel automobiles – an area where global emission standards are causing a “structural upward shift in demand for these auto catalysts and the platinum used in them.”

Interestingly, one of the key areas of interest for the Chinese is not so much Platinum’s versatile application. As Rapoza argues:

“Less well known, however, is that the largest single source of platinum demand over the past few years has been jewelry – and nearly all of that demand stems from the Chinese.”

He raises several interesting points in his piece:

  • While catalysts used in vehicles accounted for the largest demand component for Platinum prior to the economic downturn in Europe, and was almost double the demand from Chinese jewelry, this ratio has been almost completely flipped. By 2012, Chinese jewelry demand had risen to nearly 2 million ounces (a 16% increase), and demand for auto catalysts in Europe had dropped to 1.3 million.
  • With Europe emerging from the recession, this demand will pick up again. Meanwhile, Chinese interest in Platinum as an adornment will likely continue to increase, as Platinum is increasingly the metal of choice for wedding bands.
  • An additional interesting development is the fact that “precious metals access in modern communist China has evolved from an almost illegal status to one that is actively encouraged by the state.”

Meanwhile, as Visual Capitalist points out in part two of their outstanding three-part visualization of Platinum’s history, supply and demand and investment opportunities, the metal’s supply is largely concentrated in medium-to-high risk jurisdictions.

The United States’ import dependency rate for Platinum presently stands at 91 percent. At the same time, Platinum has made the top tier of the American Resources Risk Pyramid in our 2012 Critical Metals report, underscoring its relevance to U.S. defense-related applications and proneness to supply disruptions.

With China stepping up its role here again, this should serve as a reminder why the United States cannot afford to ignore this proverbial “800 pound gorilla” and would be well advised to devise a comprehensive critical minerals strategy.