abrdn Platinum ETF Trust

This section provides a brief introduction to the platinum industry by looking at some of the key participants, detailing the primary sources of demand and supply.

In this annual report, the term “ounces” refers to troy ounces.

Platinum Group Metals

Platinum and palladium are the two best known metals of the six platinum group metals (“PGMs”). Platinum and palladium have the greatest economic importance and are found in the largest quantities. The other four—iridium, rhodium, ruthenium and osmium—are produced only as co-products of platinum and palladium. PGMs are known for their purity, high melting points and unique catalytic properties. In addition to their oxidation and reduction properties, they are also extremely resistant to corrosion. PGMs are utilized in a number of industrial processes, technologies and commercial applications. Their unique chemical and physical properties make PGMs an excellent raw material, catalyst and ingredient for manufacturing processes. Consumer and industrial products made with platinum and other PGMs include flat panel monitors, glass fiber, medical tools, computer hard drives, nylon and razors, among others. PGMs play a critical role in autocatalysis and pollution control in the automotive sector.

PGM mining is heavily concentrated in southern Africa (South Africa and Zimbabwe), with smaller percentages coming from the United States, Russia and other locations. South Africa is the world’s leading platinum producer and one of the largest palladium producers. Russia is the second largest producer of platinum. All of South Africa’s production is sourced from the Bushveld Igneous Complex, which hosts the world’s largest resource of PGMs. Together, South Africa and Russia accounted for over 83% of platinum supply in 2023.

World Platinum Supply and Demand 2014-2023

The following table sets forth a summary of the world platinum supply and demand over the past 10 years (from 2014 to 2023) and is based on information reported by Johnson Matthey, PGM Market Reports (2015 – 2024).

Source: Johnson Matthey PGM Market Report (2015-2024).

The following are some of the main characteristics of the platinum market illustrated by the table:

The main supplier of platinum is South Africa, providing approximately 71.4% of total mine supply over the past 10 years (2014-2023). Russia is the second largest supplier of platinum. Its share of world mine production has averaged around 11.7% of total mine supply over the past ten years ended 2023. Scrap supply from recycling of autocatalyst and other sources have accounted for about 24% of total supply over the last 10 years.

Over the ten years ended December 2023, jewelry demand for platinum peaked at approximately 36% of total demand in 2014. Jewelry demand has since declined to 18% total demand in 2023, following a consistent downward trend. Automotive demand for platinum, which accounted for around 36% of total demand at the end of 2014, has increased to roughly 44% of total demand as of the end of 2023. Following two consecutive years of growth, investment demand fell from a high of 14% in 2020 into negative territory in 2022 at (9%) but improved to 1% in 2023. Pollution control demand, which captures the production demand of non-road vehicles such as agricultural equipment and industrial machinery as well as small engines and stationary source emissions controls in factories that use technology that is similar to autocatalysts, increased to 4% of total demand in 2023.

Historical Chart of the Price of Platinum

The price of platinum is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of platinum in the past are not a reliable indicator of future movements. The following chart illustrates the movements in the price of an ounce of platinum in U.S. Dollars from December 31, 2014 to December 31, 2024 and is based on information provided by Bloomberg:

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spo Platinum Price = PLTMLNPM Index.

The following is a discussion of the movements in the price of platinum illustrated by the table:

In 2012, platinum prices rose on the back of supply disruptions in South Africa, which accounts for more than 72% of the world’s supply of platinum. A strike at one of South Africa’s biggest platinum mines caused the price of platinum to rise from $1,387 to $1,709 per ounce in August 2012. At the beginning of 2013, Anglo American Platinum, the world’s biggest producer of the metal, announced its intention to close four mine shafts and its consideration of selling another mine complex as part of a radical overhaul of its South African operations. This statement prompted a strong reaction on platinum prices, which rose from $1,656 to $1,736 per ounce in the days following the announcement, on fears of a further tightening in platinum supply. However, platinum’s correlation to gold weighed on platinum prices in 2013 overall. Prolonged strikes at South African mines in 2014 led to the deepest supply deficit in platinum since 1975 (the earliest date we have supply and demand data). However, that failed to arrest the price slide which saw prices fall 11% in 2014, highlighting the extent of negative sentiment towards industrially-exposed precious metals. Despite autocatalyst demand for platinum increasing in 2015, tightening nitrogen oxide emission standards have led to pessimism about the future demand for platinum-heavy diesel autocatalysts relative to palladium-heavy gasoline autocatalysts. Further pessimistic outlook for South Africa’s economy and its currency the South African Rand weighed on platinum prices throughout 2017, and platinum continued to fall in 2018 driven by lackluster investor sentiment, a stronger US dollar, weaker diesel demand and rising mine supply. Platinum prices bounced back, rising 19.9% to $952 per ounce at the end of 2019. After seeing the price fall as low as $593 per ounce on March 19, 2020, platinum rebounded from pandemic lows and finished the year at $1,068 per ounce. The steep climb in palladium price has led some investors to conclude that platinum appears under-valued, in view of its potential to substitute for palladium in automotive applications in the future. Additionally, the outlook for mining in South Africa is increasingly uncertain, with producers facing steep increases in electricity prices, periodic disruption to power supplies and a risk of industrial action during anticipated wage negotiations. In 2021, platinum took a back seat to risky assets, similarly to other precious metals, as it returned -10% (as of December 31, 2021). Follow through from auto production disruptions during the pandemic were a major contributor to the price performance in 2021. The price of platinum reached as high as $1,151 per ounce on March 8, 2022, as Russia’s invasion of Ukraine and the threat of sanctions on Russian exports, including platinum, pushed prices higher. However, while other precious metals (gold, silver, palladium) saw prices fluctuate throughout the year, platinum’s volatility was much more pronounced within the first quarter of 2022, as the price fell roughly 15% by March 31, 2022, to close the first quarter at $983 per ounce. Aggressive interest rate hikes by the U.S. Federal Reserve, a strong U.S. Dollar and risks of diminishing global economic growth exerted additional pressure on prices, as the price of platinum fell as low as $831 per ounce on July 14, 2022. Through the end of 2022, increasing autocatalyst demand and a growing substitution of platinum for palladium contributed to ongoing physical market tightness, despite a global surplus, which saw the price of platinum increase roughly 24% from July 14, 2022 through December 31, 2022 to $1,031 per ounce.

In 2023, a decrease in platinum production in South Africa, the world’s leading producer, has continued to impact global supply (see “World Platinum Supply and Demand in 2023” above for additional discussion). While industry analysis groups see potential for a nearly 1-million-ounce deficit in platinum in 2023, the price performance has not reflected this sentiment over the course of the year as the market remains well supplied pulling from existing above ground stockpiles. Despite a positive outlook at the beginning of the year, fueled by China’s loosening of Covid-related restrictions, that drove the price as high as $1,128 per ounce on April 21, 2023, the Chinese economic rebound disappointed investors and led the price of platinum to fall as low as $850 per ounce on November 13, 2023. While an end-of-year rally saw the price of platinum increase roughly 18% off the yearly low to $1,000 per ounce, platinum ended the year approximately 3% below its 2022 closing price.

In 2024, mining production in South Africa has continued to impact global supply, as the country experiences some remaining power supply disruptions, although at a far lower pace than in 2023. Political instability, inflation and volatile market prices have compressed profit margins and subsequently led to a decrease in expected supply from the world's leading producer. As a result, platinum markets remained volatile throughout the year while prices have not responded to the existing supply side deficit as above ground stocks are being worked through. An increase in expected automotive demand provided some tailwinds during the first half of the year sent the spot price of platinum as high as $1,065 per ounce on May 17, 2024. However, the lackluster Chinese economic rebound and disappointing level of stimulus turned to headwinds as the price retreated to $910 per ounce. The risk of additional sanctions on Russian metal exports in October provided some temporary price support, however market fears over supply restrictions quickly dissipated, and prices retreated once more. Headwinds grew as the US election resulted in an increased potential of tariffs that are large enough to slow global economic growth and the spot price of platinum ended the year down -8.6%, at $914 per ounce.