China plans to publish a report on palladium and platinum inventories once it rolls out its first derivatives market for these precious metals. Through the Guangzhou Futures Exchange, the East Asian country intends to release daily figures on warehouse stockpiles tied to the physical delivery of these contracts, providing an unusually clear view of domestic demand.
Although the volume of metal traded on the exchange will represent only a fraction of China’s overall platinum and palladium activity, the reported inventories will offer a useful indicator of market dynamics in one of the most significant markets in the world.
At present, China has no official data on nationwide stockpiles of these metals, even though the Shanghai Gold Exchange does provide spot trading for platinum. Any holdings outside the new futures market will remain undisclosed.
This year alone, platinum has seen its price increase by almost 80% thus far, surpassing even gold’s performance. Its performance follows years of tight supply, which have been worsened by tariff concerns that redirected significant quantities of the metal to American storage facilities, as well as by Chinese imports that appear to exceed local consumption estimates.
Since China produces very little platinum and maintains control on exports, each shipment that enters the country removes additional liquidity from the global market. The World Platinum Investment Council’s Regional Head of the Asia Pacific, Deng Weibin, explains that transparency in the domestic market may increase with the introduction of new contracts.
While Deng estimates that futures trading shall begin in a couple of weeks, this has not been confirmed. He adds that this move by China may also grow the country’s influence on global prices.
Data on platinum stockpiles isn’t publicly available in the London market either. This could be because most of the metal is stored in powder or granule form in private vaults of select market makers. This is different from silver and gold, which have their inventories published monthly and are mainly stored in bar form in vaults that support the market.
The Guangzhou exchange plans to allow the metal to be held in sponge or powdered form, making it the first to do so.
Platinum is a key component in automotive catalytic converters that reduce emissions. It is expected that the metal’s industrial demand in China will increase to augment investment buying, further reducing inventories.
The slow adoption of electric cars as the demand for fossil-fuel powered vehicles continues to remain steady, has also contributed to the depleting stockpiles. This is because fuel-powered vehicles require platinum in their catalytic converters.
As platinum market dynamics continue to evolve, leading producers like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) will continue extracting as much of the metal as they can to feed the growing demand.
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