Emerging Markets Need Platinum

Fifty percent of the platinum mined annually is used by the automotive industry. It is used to produce catalytic converters. Although the auto industry would prefer to use less expensive palladium to produce catalytic converters this is not always possible. Platinum is also used to make jewelry. In some emerging markets jewelry is not necessarily worn. Rather it is bought an investment. Platinum is also used in chemical, electrical, and glass manufacturing.

The United States is considered a well-developed market. However, China is an emerging market. As their economy continues to expand they will be in need of more cars and trucks. Surprisingly, General Motors already sells more cars in China than in the United States. This means China and other emerging markets like India need more catalytic converters. As other new markets start to pass and enforce new air pollution laws the demand for platinum will increase further.

Indeed, companies are targeting these new markets for their products. As mentioned jewelry in some of these emerging markets are purchased for investment purposes. Since platinum is used to produce jewelry demand here will only go up. Platinum is 30 times rarer and mined in smaller quantities than gold. However, demand is strong and increasing. Currently platinum is over $1800 per ounce and will likely go up more. Platinum is more volatile than gold making it an excellent short-term investment.

Platinum is usually produced as a byproduct of copper and nickel and is one of the rarest metals. The world’s largest producer of platinum is South Africa. It is estimated they hold 95 percent of the world’s platinum reserves. Since platinum is so rare many companies now recycle as much of the precious metal as possible.

In addition, because the automotive industry uses so much platinum they have a real influence on its price. When the auto market is depressed expect platinum prices to dip. Until recently diesel catalytic converters could only be produced from platinum. However, improved technology now allows 25 percent of diesel converters to be produced with less expensive palladium, and this may increase to 50 percent in the near future.

On the whole, platinum is one of the rarest metals on earth. It is used in the production of catalytic converters. While the automotive industry would prefer to use less costly palladium this is not always possible. Emerging markets will account for a significant increase in platinum demand as these countries buy more cars, trucks, and jewelry.

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