Edward Sterck: Platinum Market Still Tight, Will Price Move in 2026?

Key Concepts

• PGMs (Platinum Group Metals): A group of six precious metals (platinum, palladium, rhodium, ruthenium, iridium, and osmium) used in industrial, automotive, and investment applications.
• Market Deficit/Surplus: The balance between total supply (mine production + recycling) and total demand.
• Above-Ground Stocks: The inventory of metal held in storage; critical for market liquidity.
• Lease Rates & Backwardation: Indicators of market tightness; high lease rates and backwardation (where spot prices are higher than future prices) signal a scarcity of available physical metal.
• ICE vs. BEV: Internal Combustion Engine vehicles versus Battery Electric Vehicles; the former requires more PGMs for emissions control.

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1. Market Dynamics and Q1 Performance

The platinum market experienced its first surplus in six quarters during Q1. Edward Sturk attributes this to two primary factors:

• Supply Normalization: Q1 mine supply was higher compared to the same period last year, which was heavily impacted by flooding in South Africa. Additionally, the industry shifted away from historical Q1 maintenance deferrals, smoothing out production.
• Recycling Growth: Higher prices incentivized the processing of lower-grade spent catalytic converters, leading to a 9% year-on-year increase in recycled supply.
• Investment Outflows: The surplus was exacerbated by outflows from ETFs (driven by profit-taking and liquidity calls for energy investments) and the release of metal from CME warehouses back into the lease market.

Despite this surplus, the market remains tight. The release of nearly half a million ounces did not eliminate market tension, as evidenced by persistent backwardation and elevated lease rates in the London OTC market.

2. Investment Outlook and Macro Factors

• The "Sell US Dollar" Trade: The conflict in the Middle East has driven inflation and interest rate expectations, strengthening the US dollar and temporarily suppressing precious metal prices. However, Sturk argues that the US fiscal position—with debt-to-GDP at record highs—creates a long-term case for investors to pivot toward "monetary-like" assets such as platinum.
• Fiscal Strain: Every 70-basis-point shift in Federal Reserve rate expectations adds approximately $231 billion in annual interest payments for the US government, further stressing the balance sheet and potentially fueling future demand for precious metals as a hedge.

3. Automotive and Industrial Demand

• Automotive Resilience: Despite a reduction in global vehicle production forecasts by one million units due to energy costs, demand for platinum has increased. This is driven by higher production forecasts for heavy-duty vehicles, which are more PGM-intensive.
• New Frontiers: Emerging demand for PGMs in Artificial Intelligence (AI) infrastructure is identified as a potential "accelerant" for platinum, iridium, and ruthenium, though it is not yet fully quantified.
• US Policy Shifts: The US government’s delay in implementing Tier 4 emissions control and the reduction of tax incentives for BEVs are viewed as supportive for the continued demand for ICE and hybrid vehicles, which rely on PGM-based catalytic converters.

4. Geopolitical Risks (The Iran Conflict)

The conflict in the Middle East poses specific supply chain risks:

• Aluminum Shortages: The Middle East produces 20% of global non-Chinese aluminum, 84% of which is specialized automotive alloy. A prolonged conflict could disrupt vehicle production.
• Helium Supply: With the region producing one-third of the world’s helium—a critical component for high-end semiconductor manufacturing—a shortage could lead to chip production shortfalls, disproportionately affecting BEV production.

5. Above-Ground Stocks

Sturk emphasizes that above-ground stocks are currently depleted.

• The 6-Month Rule: In commodity markets, having less than six months of demand in above-ground stocks is considered fundamentally low.
• Trend Analysis: While exact figures are estimates, the trend shows a consistent depletion over several years of deficits. This lack of "buffer" stock keeps the market vulnerable to supply shocks and maintains price volatility.

Synthesis and Conclusion

The platinum market is currently in a transition phase. While Q1 saw a temporary surplus due to supply normalization and institutional liquidity shifts, the fundamental outlook remains bullish. The World Platinum Investment Council forecasts a deficit of approximately 300,000 ounces for 2026. Key takeaways for investors include:

1. Structural Deficits: The market is entering a period of sustained supply-demand imbalance.
2. Monetary Hedge: Platinum is increasingly viewed as a hedge against US fiscal instability and dollar weakness.
3. Policy Support: Regulatory shifts in the US are extending the lifespan of PGM-reliant internal combustion and hybrid technologies.
4. Liquidity Tightness: With above-ground stocks at historically low levels, the market remains highly sensitive to any supply disruptions or surges in investment demand.