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Platinum: the middle child of the precious metal family

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Platinum is often excluded, ignored, or outright neglected. When investors think of precious metals their minds immediately run to gold and silver. Meaning that platinum, which is 30 times rarer than gold, receives less attention than it deserves.

Platinum is enjoying a quiet renaissance, thanks to its role in building the hydrogen economy. Able to withstand unfathomably hot temperatures without melting or reacting, platinum is crucial for the hydrogen economy, which is set to grow in importance in coming years.

How else is platinum used? Where does it come from? In this episode, I spoke with Trevor Raymond, head of research at the World Platinum Investment Council (WPIC), to learn more about this precious metal.

Platinum Drivers & Suppliers

Only a relatively small amount of platinum gets mined every year, Trevor notes. Almost all of it comes from a small region in South Africa.

Platinum is used in four main areas: automotive catalysts, which scrub the emissions out of diesel engines; jewellery, which is a big market; industrial, especially glassmaking; and then finally investment demand much like gold.

Of these uses, the most important now is in automotive catalysts, especially in China. As governments tighten emissions standards to help keep the world’s air clean, car makers are getting forced to make better catalysts. On a short-term basis, platinum is appealing as a car catalyst – compared to potential alternatives like rhodium or palladium – because it is trading at a discount.

But looking into the future, the hydrogen economy holds the most promise. The hydrogen economy over the last 18 months has gone from a science project to a certainty, Trevor says. Which may mean for investors taking a longer-term view, such as those saving for retirement, it could offer great value.

In particular, Trevor says, the opportunity is to be found in “green hydrogen”. Green hydrogen is different from “grey hydrogen” in that no fossil fuels are burnt creating it. Green hydrogen is made by putting an electric current through water with a piece of technology called an “electrolyser”(whereas grey hydrogen is made from gas, and arguably not a true clean energy).

Platinum is used to build these electrolysers and, therefore, is used in the process that generates green hydrogen.

Already at this very early stage, the numbers look good. Europe is going to produce 40 gigawatts of electricity from green hydrogen. China, Trevor says, will do way more than that. “So, over 10 years, you're going to have a lot of platinum going into electrolysers to produce green hydrogen,” he says.

But platinum will also be used in fuel cells for hydrogen powered cars and trucks. Trevor says: “In a Toyota Mirai or a Hyundai Nexo, you're using 15 to 20 grams [of platinum], so maybe half an ounce. So, if you're looking at... 5 million [hydrogen powered] vehicles in 15 years’ time, now that's an extra 2 million ounces of platinum [demand that will be created].”

“Certainly, in the medium term, holding some platinum as a linkage to the hydrogen economy, certainly is a good idea, but definitely part of the demand growth comes from those heavy-duty [diesel] fuel cell vehicles in the short term, but nonetheless, a great theme and a great broader interest point for considering platinum as an investment asset.”

How to Access Platinum

As with any precious metal, investing directly in the metal can be difficult and have high associated costs. ETF Securities has available ETFS Physical Platinum (ASX Code: ETPMPT) which offers a simple, cost-effective and secure way to access the metal in the form of an exchange traded commodity.