As a boy, I first learned about platinum from my great-grandfather, a metallurgist who, back in the 1870s, worked it in high-quality laboratory equipment and dentistry. In those days, inventive minds still hadn’t cracked the problem of platinum’s poor malleablity, although arsenic made the metal more workable in the early days. Then, in the later 1890s, came the first big market break: Cartier and other jewellers promoted platinum jewelry. After 1900, diamonds were set exclusively in platinum rather than gold. The giant, fabulous Cullinan and Koh-i-noor Crown jewels are exquisite examples. Platinum’s affinity to jewelry-making is a result of its superior hardness and strength, permitting lighter- weight settings. Peter Faberg , whose exotic creations dazzled Russian tsars and tsarinas, worked it extensively. But in spite of its inroads as bauble of choice to Russian royalty, platinum demand remained small. Near the tail- end of the Great Depression, in 1938, total throughput in the Johnson Matthey refineries was a meagre 0.78 ton. During the Second World War, output jumped to 1.24 ton. Not many years later, however, platinum consumption would soar.
My great-grandfather, were he alive today, probably would not be surprised that 84 tonnes of platinum (excluding Russian production) are now mined every year. The metal’s unique properties were apparent even in his day. Platinum is the rarest of metals, far scarcer than gold or silver. (Consider that 1,300 tons of gold and 10,000 tons of silver are mined yearly.) Almost 10 tons of ore must be extracted from South African workings to produce an ounce of platinum, while three to five tons of gold ore will yield an ounce of the yellow metal.
World supplies of new platinum come mainly from South Africa (81%) and the Soviet Union, although South Africa is becoming increasingly unstable. But world supplies continue to rise: 1987 output was double that of 1976. In a book I wrote on platinum, which was published in 1979, I forecasted that demand would require South African mine output to jump to at least 100 tons by the year 2000 from the 1978 figure of 60 tons. I still hold to that 9-year-old prediction.
Platinum is used in the production of an astonishing 20% of the world’s manufactured goods. Because of its relatively light weight, catalytic properties, untarnishability and strength, platinum has few rivals among the metals. Old uses do not die and new uses keep coming along. Automobile exhaust catalytic converters consume the most industrial platinum. These are sold mainly in the U.S., Japan and Canada. The most important future development will be the $1-billion automobile catalyst market developing in Western Europe, which will need huge amounts of the metal by the early 1990s – – say 15% to 20% of world demand for cars. Improved auto emission control technologies, including “lean-burn” engines requiring less platinum, may be developed, but these have yet to materialize.
The second-largest consumer of platinum is the jewelry industry, drawing off some 25% to 30% of world- wide supplies annually. Beyond jewelry and auto catalytic converters, platinum’s range of uses is remarkable. Either as a component part or in the manufacturing process, platinum plays a role in fertilizers, fibreglass and fibre optics; surgical scalpels, razorblades and electric shavers; eyeglasses and specialized optical glass; steel structures and ships (for cathodic protection); and synthetic rubies for lasers and masers. It is also found in cameras and toasters, thermocouples and thermometers, anti- cancer drugs and heart pacemakers, powerful permanent magnets and gas turbine blades; and (believe it or not) in raising orchids. My great-grandfather would have been heartened to hear that dentists still use it, too.
Demand for this most prolific of metals has soared 50-fold in the past half-century, with little let-up in new applications. As a result, platinum demand has overshot supply for the past three years in spite of rising mine production and the supply gluts of the early 1980s. Although world platinum demand in 1988 may exceed that of 1987 by as much as 6%, supply next year could be slightly ahead of consumption. South Africa is largely to blame. That troubled land is developing several new mines that will add 12 tonnes annually to the market by 1991 and another 12 tonnes by 1994.
Where will that leave prices? It’s hard to say, but let’s look at the background first. Platinum and rhodium are the only metals to have sold for more than $1,000 (us) per troy ounce. The U.S. dollar platinum price (as distinct from its price in Japanese yen, West German marks or Swiss francs) is a thoroughly reliable indicator of precious metals price tendencies in the near term. Platinum prices have led all major precious metals price movements in the past three years.
Consumers typically carry fairly small inventories, and no overwhelmingly large above-ground stocks of platinum metal sit ready to flood the market, as is the case with gold. This is bullish for the platinum price. During the past three years, it has gone from a 1985 low of $260 (us) an oz to the current level of around $500.
But the price outlook rests largely on the haziest of factors — future economic growth. A general economic slowdown in the West and the Far East would dampen prices. Some have forecast such a recession in 1989 or 1990. Inflation and interest rates are still low in the leading nations, but they are rising. The platinum price, as usual, should keep pace with inflation in the long run.
Keeping all this in mind, I forecast that prices will oscillate in the future, but they will trend steadily upwards at an average annual rate of about 4% through 1999. Expect quotes to skyrocket with any major upheaval in South Africa, accelerating mining costs, serious strikes in the country’s labor-intensive mines, shipment interruptions or severe U.S. government sanctions under a bill now going through Congress. South Africa may not escape the winds of change, particularly the country’s precious metals producers that are so vulnerable to modern weapons and flooding. Gold, platinum and gem diamonds form the lion’s share of that country’s gross domestic product and vital export earnings. Another bullish factor is that a serious world platinum supply shortage appears likely to develop anyway, by at least 1994. Also bullish is the very probable decline in Soviet exports.
U.S. dependence (to the tune of 80% to 90%) on South African platinum for countless industrial uses is so great that, if our neighbors to the south were cut off completely from the South African platinum pipeline, a drastic restructuring of a very large part of the U.S.’s industrial manufacturing would be inevitable. A forced sacrifice of a portion of its standard of living would also ensue.
Under any set of circumstances, the U. S. market would welcome increased Canadian mine output of platinum. Canada is, after all, still the world’s third-largest mine producer of the metal. The implications for Canadian platinum exploration are good. Already, we have seen an enormous increase in activity, especially by junior, high-risk companies. Canadian projects include those of companies such as Nexus, Madeleine (the most advanced), New Quebec Raglan, Fleck, International Platinum (with giant Degussa behind it), Galactic, Equinox, Technigen, La Fosse Platinum and Longreach. Among the bigger players are BP-Selco, Placer Dome and Agnico-Eagle. Some properties now considered marginal will become increasingly viable under the stimulation of the higher prices coming.
I suspect my ancestor the metallurgist would have been pleased that the metal he worked so long ago still displays such a bright future. T. P. (Tom) Mohide, a former president of the Winnipeg Commodity Exchange, served as a director of mining resources with the Ontario Ministry of Natural Resources prior to his retirement in 1986.
As a boy, I first learned about platinum from my great-grandfather, a metallurgist who, back in the 1870s, worked it in high-quality laboratory equipment and dentistry. In those days, inventive minds still hadn’t cracked the problem of platinum’s poor malleablity, although arsenic made the metal more workable in the early days. Then, in the later 1890s, came the first big market break: Cartier and other jewellers promoted platinum jewelry. After 1900, diamonds were set exclusively in platinum rather than gold. The giant, fabulous Cullinan and Koh-i-noor Crown jewels are exquisite examples. Platinum’s affinity to jewelry-making is a result of its superior hardness and strength, permitting lighter- weight settings. Peter Faberg , whose exotic creations dazzled Russian tsars and tsarinas, worked it extensively. But in spite of its inroads as bauble of choice to Russian royalty, platinum demand remained small. Near the tail- end of the Great Depression, in 1938, total throughput in the Johnson Matthey refineries was a meagre 0.78 ton. During the Second World War, output jumped to 1.24 ton. Not many years later, however, platinum consumption would soar.
My great-grandfather, were he alive today, probably would not be surprised that 84 tonnes of platinum (excluding Russian production) are now mined every year. The metal’s unique properties were apparent even in his day. Platinum is the rarest of metals, far scarcer than gold or silver. (Consider that 1,300 tons of gold and 10,000 tons of silver are mined yearly.) Almost 10 tons of ore must be extracted from South African workings to produce an ounce of platinum, while three to five tons of gold ore will yield an ounce of the yellow metal.
World supplies of new platinum come mainly from South Africa (81%) and the Soviet Union, although South Africa is becoming increasingly unstable. But world supplies continue to rise: 1987 output was double that of 1976. In a book I wrote on platinum, which was published in 1979, I forecasted that demand would require South African mine output to jump to at least 100 tons by the year 2000 from the 1978 figure of 60 tons. I still hold to that 9-year-old prediction.
Platinum is used in the production of an astonishing 20% of the world’s manufactured goods. Because of its relatively light weight, catalytic properties, untarnishability and strength, platinum has few rivals among the metals. Old uses do not die and new uses keep coming along. Automobile exhaust catalytic converters consume the most industrial platinum. These are sold mainly in the U.S., Japan and Canada. The most important future development will be the $1-billion automobile catalyst market developing in Western Europe, which will need huge amounts of the metal by the early 1990s – – say 15% to 20% of world demand for cars. Improved auto emission control technologies, including “lean-burn” engines requiring less platinum, may be developed, but these have yet to materialize.
The second-largest consumer of platinum is the jewelry industry, drawing off some 25% to 30% of world- wide supplies annually. Beyond jewelry and auto catalytic converters, platinum’s range of uses is remarkable. Either as a component part or in the manufacturing process, platinum plays a role in fertilizers, fibreglass and fibre optics; surgical scalpels, razorblades and electric shavers; eyeglasses and specialized optical glass; steel structures and ships (for cathodic protection); and synthetic rubies for lasers and masers. It is also found in cameras and toasters, thermocouples and thermometers, anti- cancer drugs and heart pacemakers, powerful permanent magnets and gas turbine blades; and (believe it or not) in raising orchids. My great-grandfather would have been heartened to hear that dentists still use it, too.
Demand for this most prolific of metals has soared 50-fold in the past half-century, with little let-up in new applications. As a result, platinum demand has overshot supply for the past three years in spite of rising mine production and the supply gluts of the early 1980s. Although world platinum demand in 1988 may exceed that of 1987 by as much as 6%, supply next year could be slightly ahead of consumption. South Africa is largely to blame. That troubled land is developing several new mines that will add 12 tonnes annually to the market by 1991 and another 12 tonnes by 1994.
Where will that leave prices? It’s hard to say, but let’s look at the background first. Platinum and rhodium are the only metals to have sold for more than $1,000 (us) per troy ounce. The U.S. dollar platinum price (as distinct from its price in Japanese yen, West German marks or Swiss francs) is a thoroughly reliable indicator of precious metals price tendencies in the near term. Platinum prices have led all major precious metals price movements in the past three years.
Consumers typically carry fairly small inventories, and no overwhelmingly large above-ground stocks of platinum metal sit ready to flood the market, as is the case with gold. This is bullish for the platinum price. During the past three years, it has gone from a 1985 low of $260 (us) an oz to the current level of around $500.
But the price outlook rests largely on the haziest of factors — future economic growth. A general economic slowdown in the West and the Far East would dampen prices. Some have forecast such a recession in 1989 or 1990. Inflation and interest rates are still low in the leading nations, but they are rising. The platinum price, as usual, should keep pace with inflation in the long run.
Keeping all this in mind, I forecast that prices will oscillate in the future, but they will trend steadily upwards at an average annual rate of about 4% through 1999. Expect quotes to skyrocket with any major upheaval in South Africa, accelerating mining costs, serious strikes in the country’s labor-intensive mines, shipment interruptions or severe U.S. government sanctions under a bill now going through Congress. South Africa may not escape the winds of change, particularly the country’s precious metals producers that are so vulnerable to modern weapons and flooding. Gold, platinum and gem diamonds form the lion’s share of that country’s gross domestic product and vital export earnings. Another bullish factor is that a serious world platinum supply shortage appears likely to develop anyway, by at least 1994. Also bullish is the very probable decline in Soviet exports.
U.S. dependence (to the tune of 80% to 90%) on South African platinum for countless industrial uses is so great that, if our neighbors to the south were cut off completely from the South African platinum pipeline, a drastic restructuring of a very large part of the U.S.’s industrial manufacturing would be inevitable. A forced sacrifice of a portion of its standard of living would also ensue.
Under any set of circumstances, the U. S. market would welcome increased Canadian mine output of platinum. Canada is, after all, still the world’s third-largest mine producer of the metal. The implications for Canadian platinum exploration are good. Already, we have seen an enormous increase in activity, especially by junior, high-risk companies. Canadian projects include those of companies such as Nexus, Madeleine (the most advanced), New Quebec Raglan, Fleck, International Platinum (with giant Degussa behind it), Galactic, Equinox, Technigen, La Fosse Platinum and Longreach. Among the bigger players are BP-Selco, Placer Dome and Agnico-Eagle. Some properties now considered marginal will become increasingly viable under the stimulation of the higher prices coming.
I suspect my ancestor the metallurgist would have been pleased that the metal he worked so long ago still displays such a bright future. T. P. (Tom) Mohide, a former president of the Winnipeg Commodity Exchange, served as a director of mining resources with the Ontario Ministry of Natural Resources prior to his retirement in 1986.
Be the first to comment on "THE PROMISE OF PLATINUM (November 01, 1988)"