The Platinum Group Metals Market: An Underappreciated Investment Case

Platinum group metals (PGMs) — platinum, palladium, rhodium, iridium, osmium, and ruthenium — are among the most technically important and commercially underappreciated metals in the world. Mined primarily in South Africa and Russia, these metals are essential inputs into automotive catalytic converters, fuel cells, laboratory equipment, jewellery, and a growing range of industrial applications.

For commodity investors, the PGM markets offer an unusual combination: genuine industrial demand significance, high concentration of supply (creating geopolitical premium), and relatively low mainstream investor awareness (creating potential mispricing opportunities).

PLATINUM: THE CASE FOR RECOVERY

Platinum has significantly underperformed gold over the past decade despite trading at a premium to gold historically. The divergence reflects the metal's heavy exposure to diesel vehicle catalytic converters — which fell out of favour following the Volkswagen emissions scandal of 2015 — and the shift of automotive industry interest toward palladium for petrol vehicles and battery electric vehicles that use neither.

The recovery case for platinum rests on three pillars: its significant and growing use in hydrogen fuel cells (each fuel cell vehicle requires approximately 30-60 grams of platinum); its potential substitution into palladium applications as palladium prices rise; and the constraints on South African supply from persistent energy infrastructure problems.

PALLADIUM: MANAGING THE EV TRANSITION RISK

Palladium's extraordinary bull run — the metal rose from under $600 per troy ounce in 2016 to over $3,000 in early 2022 — was driven by tightening emission standards that increased loading requirements for petrol vehicle catalytic converters. The bear case is straightforward: electric vehicles, which use no catalytic converters, are taking market share from petrol vehicles and will reduce automotive palladium demand over time.