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MembersUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
Online Salon on Platinum Group Metal Opportunities in the Post-Pandemic Era Held
Release time:
08 May,2020
In March this year, the platinum group metals industry experienced an unprecedented sharp drop, with platinum falling below its historical low and rhodium falling by nearly 70% in a short period. Border closures in various countries due to the epidemic severely restricted and essentially halted the import of platinum group metals. The shutdown of platinum group metal mines in South Africa and the global spread of the epidemic left companies in the platinum group metals industry feeling bewildered. What does the future hold for the platinum group metals industry in the post-pandemic era? On the afternoon of May 7, the Precious Metals Industry Committee of the China Resource Recycling Association and the World Platinum Investment Council jointly hosted an online salon event titled "The Platinum Group Metals Industry in Crisis."
In March of this year, the platinum metal industry experienced an unprecedented sharp decline, with platinum falling below its lowest point in history and rhodium falling nearly 70% in a short period of time. Due to the closure of borders caused by the epidemic, platinum group metal imports were severely restricted and basically came to a halt. Platinum group metal mines in South Africa were shut down, and the global spread of the epidemic and other events left companies engaged in the platinum group metal industry feeling confused. What is the future of the platinum group metal industry in the post pandemic era? On the afternoon of May 7th, the Precious Metals Industry Committee of China Material Recycling Association and the World Platinum Investment Association hosted an online salon event titled "Platinum Group Metals Industry under Crisis".
Vice President and Secretary General of the Precious Metals Industry Committee of China Material Recycling Association, Bian Jiang, Party Branch Secretary and Deputy General Manager of Precious Metals Branch of Sinopec Catalyst Company, Xu Jinsong, Senior Consultant of LBMA Asia, Jeremy East, Director of UK Metal Focus Company, Nikos Kavalis, and Host of the World Platinum Investment Association Asia Pacific Region, Deng Weibin, held a multi angle and all-round exchange feast on the impact of the epidemic on the supply and demand of platinum group metals industry at home and abroad and the international market.
Building strategic reserves and improving market development
Since this year, the COVID-19 has profoundly affected the global economic development, the international precious metal prices have shown a high volatility trend, and the development of platinum and other domestic precious metal industries has also been severely tested. Borderland pointed out that the production of major epidemic prevention materials such as antiviral drugs, meltblown fabrics, and temperature detection optical materials cannot be separated from platinum group precious metals. In the early stage of the epidemic, in order to ensure the smooth production and supply of these extremely scarce materials, relevant precious metal material enterprises resumed work and production in advance. After the global outbreak of the pandemic, platinum group metal prices experienced two panic crashes in a short period of time, catching these companies off guard and suffering heavy losses.
Due to the fact that our country's annual mineral resources of platinum group metals are only about 3 tons, which cannot meet domestic demand, we mainly rely on imports. However, under the impact of the epidemic, exporting countries have stopped production, transportation has been blocked, and platinum group metal imports have been basically interrupted. Domestic supply has been seriously affected, and the market was once chaotic, with palladium prices even showing an 'inverted' phenomenon. During this period, inventory and recycled precious metals became important supplements to ensure market supply, gradually stabilizing the tight supply and demand situation in the market, "said Bian.
In the face of such an unfavorable situation, Bian suggests that relevant national departments should attach importance to the development of platinum group and other precious metal industries, fully recognize the important role of platinum group precious metals in the development of China's national economy. At the same time, the Precious Metals Industry Committee of the China Material Recycling Association has also established a large advisory team in finance, law, and taxation, focusing on solving a series of problems faced by the industry's development, and working together with the industry to overcome difficulties and seize opportunities in crises.
Xu Jinsong also added a suggestion, "Platinum group metals are an indispensable strategic resource for China. In addition to gold and oil reserves, platinum group metals such as platinum, palladium, and rhodium should also be reserved to avoid adverse effects on domestic industries caused by foreign supply problems
During the salon event, Xu Jinsong outlined the characteristics of major foreign precious metal exchanges such as the London Metal Exchange, Zurich Gold Market, Russian Futures Exchange, and India Multilateral Commodity Exchange, as well as major domestic precious metal exchanges such as the Shanghai Gold Exchange and Shanghai Futures Exchange. Xu Jinsong pointed out that compared to the main precious metal trading markets abroad, there are fewer platinum group metal trading products in the domestic precious metal trading market. From spot trading, futures trading to off-site leasing, there is overall room for optimization in terms of trading varieties, price liquidity, trading time, etc. Moreover, in terms of electronic logistics networks, overseas markets have mature electronic precious metal accounts that can easily complete the transfer of precious metal ownership and physical goods. The management of precious metal accounts in China is currently under construction and improvement.
Whether buying or selling, they are limited by their own rigid needs and lack the opportunity to choose. They can only passively respond to changes in market prices, which brings huge asset security risks to platinum group metal industry enterprises. Xu Jinsong said that the main way for domestic industrial enterprises to trade platinum group metals is spot buying and selling, generally determined by production needs, purchased from the market when needed, and sold from the market when not needed. However, from holding to selling, enterprises do not have the ability to adapt to price risks throughout the entire process, and prices are only determined by their own supply and demand points, passively responding; If the purchase is made in advance or the sale is postponed, the enterprise will face many pressures, such as holding costs, buying and selling timing, production pressure, environmental risks, etc.
Xu Jinsong suggested that China needs to establish a more comprehensive platinum group metal trading market as soon as possible to meet the needs of physical enterprises, so that enterprises can buy, sell, lease, and trade futures at different times to prevent the risks of holding platinum group metals, reduce costs, and enhance operational quality and efficiency. The relevant departments of the country should learn from the experience of foreign markets, develop more precious metal trading centers and products that meet market demand, and form a unified and standardized market network and all-weather service system through the continuous construction of institutional regulations and the use of new technological means.
Platinum Opportunities in Crisis
Currently, the unprecedented global pandemic has disrupted the development pace of various fields such as the world economy, finance, and society, profoundly changing the supply and demand fundamentals of commodities and precious metals. Before the outbreak of the pandemic, the World Platinum Investment Association predicted the fundamentals of global platinum supply and demand in 2020: a total global supply of 252.5 tons and a total demand of 248.8 tons. However, after the outbreak, the fundamentals of global platinum supply and demand have undergone significant changes.
Deng Weibin pointed out that major production cuts have occurred in South African mines, which are the main global suppliers of platinum, since the beginning of this year. Firstly, the converter plant accident in the UK and US platinum industry may reduce platinum production by 15.6 tons. Secondly, due to the epidemic, South African mines have been locked down for 5 weeks and are expected to reduce platinum production by 8 tons. Thirdly, global logistics disruptions and the shutdown of recycling factories are expected to affect the secondary market supply of platinum in the second half of the year. On the demand side, although there has been a decrease in demand for automobiles and a sluggish overall jewelry consumption market, the strong risk aversion demand during the pandemic has driven a significant increase in investment demand for physical platinum.
Dongfeng Jie said that Zurich and other major markets performed well in the face of the COVID-19. Despite consistently high trading volume, trading and settlement remain orderly and problem free. However, the epidemic has had a significant impact on the supply chain of the market, affecting major participants such as capital risks for banks, air freight delays for logistics companies, personnel isolation for refineries and producers, and so on. The epidemic has caused serious chaos between markets, and it is expected that this chaos will continue to exist in the medium term. Meanwhile, these confusions have also brought unprecedented new trading opportunities.
Nick Cavallis also stated that 80% of the global platinum supply comes from South Africa and Zimbabwe, which have implemented lockdown measures. At present, Zimbabwe's operations have obtained special exemption policies and can continue production, but due to its dependence on South African refineries, its output will still be limited. In addition, nearly half of the global platinum gold production comes from labor-intensive production lines in South Africa, where production will still be affected by the 'resumption distance agreement' after the lockdown period.
"If the COVID-19 continues to deteriorate and becomes more difficult to control than currently expected, the demand for platinum group metals in the automotive industry may decline significantly. In general, the impact of supply disruptions caused by the COVID-19 will be greater than the decline in demand for jewelry and automotive exhaust catalysts." Nix Cavallis believes that the market supply surplus in the platinum market will ease this year. However, sustained market surplus remains the main restraining factor for the rise in platinum prices, and the main driving force for this year's platinum price increase will be the spillover effect of the rise in gold prices.
In contrast, the COVID-19 has little impact on the palladium supply, but it has led to a sharp decline in the demand for palladium in the automotive industry. Nix Cavallis predicted that this year's palladium market supply shortage exposure will shrink. However, persistent structural shortages may support prices to continue rising.
In terms of the performance of the domestic platinum market, the import volume of platinum increased significantly in the first quarter, the delivery volume of platinum on the Shanghai Gold Exchange surged in the first quarter, and the rental interest rate of the platinum spot market was in double digits; This has further driven the platinum spot price to quickly rebound from below $600 per ounce to above $750 per ounce, but it is still 25% lower than the high of $1000 at the beginning of the year.
Deng Weibin believes that the fuel vehicle market is expected to remain the mainstream market in the next decade, and with the tightening of global exhaust emission policies, it will support the demand for platinum group metals; The persistent shortage in the palladium market will drive platinum to enter the reverse substitution (partially) of palladium in gasoline vehicle catalysts; The EU's carbon reduction policies and governance plans for older diesel vehicles are expected to boost platinum demand; The booming development of global fuel cell vehicles and hydrogen energy industries will benefit platinum demand in the long run.
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