January 23, 2017 | South Africa’s largest miner producer of gold has been given the green light to proceed with the $2.2 billion acquisition of Stillwater Mining (NYSE:SWC), the only US platinum producer. … Read MoreGet Platinum Stock Investor Kits
Though platinum is now commonly used in jewelry, electrical contacts and catalytic converters for vehicles, Spanish explorers were unaware of its value when they first came across the metal on a 16th century expedition in Colombia. They gave it the name “platina,” or little silver, and regarded it as nothing more than an unwanted impurity in the silver and gold that they were mining; thus, platinum had little value until the 18th century.
It wasn’t until the 19th century that a method of producing malleable platinum was found and the catalytic properties of the metal began to be studied. In 1842, the first fuel cell was devised using platinum electrodes.
Since the mid-20th century, platinum has been used to increase the octane rating in gasoline and has been an important component in the rapidly-expanding plastics industry. In the 1960s, platinum jewelry quickly gained popularity in Japan, and there was a rise in demand in the following decades across Asia, Europe and North America.
Platinum also became popular in the 1970s in the United States after new regulations on air quality led to the rise of the metal as an autocatalyst, converting noxious gases into safe substances in automobiles.
South Africa and Russia are currently the two foremost producers of platinum in the world, with South African production accounting for roughly 70 percent of world supply. The metal is also mined in the United States, South America and Canada.
The global supply of platinum hit a nine-year low in 2012 due to significant losses in mine supply in South Africa. 2012 saw only 5.8 million ounces of platinum produced globally, and production hit a 15-year low of 4.7 million ounces in 2014.
A protracted 5-month long mine worker strike in South Africa cut into the output of top platinum producers last year, but did little to raise prices. Above ground stockpiles of platinum were estimated at 2.8 million ounces for 2014 by the World Platinum Investment Council (WPIC), but the exact numbers on above ground stocks are still unknown.
Platinum prices averaged $1,388 per ounce in 2014, and are expected to average $1,170 in 2015, as South African production continues to ramp up in the wake of last year’s strikes, according to Thomson Reuters GFMS.
A bullish future for platinum?
Still, some market participants remain bullish on the white metal. Mining mogul Robert Friedland, executive chairman of Ivanhoe Mines (TSX:IVN), has spoken about the importance of platinum in improving air quality as the world’s growing population continues to urbanize. Specifically, he noted that changing standards in China will require 90 million vehicles to be retrofitted with catalytic converters.
Ivanhoe is working to develop the Platreef platinum project in South Africa.
Investing in platinum
Consumers and investors who are interested in platinum have several options. The first is to purchase physical platinum bars or coins directly, which can be done through a bullion dealer. Another option is to buy platinum through an exchange-traded fund (ETF). ETFs are securities that track platinum like an index fund, but that trade like stocks on an exchange.
The Sprott Physical Platinum and Palladium Trust (ARCA:SPPP) provides investors with access to the physical platinum bullion market while allowing the flexibility of an exchange-traded security. ETFS Physical Platinum Shares (ARCA:PPLT) aims to make commodity investing more accessible by offering a comprehensive range of exchange-traded commodities.
A third option for investing in platinum is, of course, to own shares of a platinum mining company. Some of the top producers include Impala Platinum Holdings (JSE:IMP,OTC Pink:IMPUY), Lonmin (LSE:LMI) and Anglo American Platinum (LSE:AAL), which was the world’s top platinum producer in 2014.