Green economy has all of a sudden become a coveted industry as China elevates its ambition in electric vehicles, and multiple countries have promised on realizing carbon neutrality, whereas the new US president Joe Biden also has a completely different approach in green energy compared to the predecessor Donald Trump, thus the prices of precious metals, such as platinum, copper, and nickel, have surged accordingly.
The hottest topic recently lies on platinum, which had a price increase of 14% this month. With the global implementation in clean energy and the reduction in demand for gold, platinum has aroused new interests in investment, and one of the applications is for alternative fuel vehicles.
As pointed out by the analysis of the Wall Street Journal, platinum is used on automotive catalysts, and is able to filter the harmful emissions of exhaust gas, though its exorbitant prices have prompted many automotive manufacturers to seek for cheaper alternatives, such as palladium, where both metals are used for catalytic converter. Platinum used to be the most expensive precious metal less than 10 years ago, however, the excessive amount of metals induced by the decrement of demand from automotive manufacturers has lowered the relevant prices.
Now hydrogen energy has once again ignited the craze of platinum. Renewable hydrogen technology uses water when producing combustible gas, and stores it within fuel cells, whereas platinum is used in electrolysis, which is the process of extracting hydrogen from water, as well as the storage procedure in fuel cells. The EU had promised earlier this year to place renewable hydrogen as the key of the European Green Deal, which aims to achieve carbon neutrality before 2050. As for China, the country strives to achieve zero emission by 2060, and may invest in hydrogen energy.
Hydrogen technology uses a significant amount of platinum, and the level of platinum required by a hydrogen fuel cell vehicle is almost 4 times the amount a diesel vehicle of platinum autocatalyst requires. What sets hydrogen fuel cells apart from autocatalysts that utilize both palladium and platinum is that the former can only use platinum, thus simply put, fuel cells are required by a hydrogen economy, and platinum is required by fuel cells. A record-breaking excess demand for platinum is expected to occur before the end of the year.
The prices of other metals that have emerged due to green technology are also escalating, including copper, nickel, cobalt, and aluminum that have been covered by the Nikkei. Fearing for a supply shortage in the future, the industry estimates that the shortage of copper may occur around 2024, whereas nickel may enter an excess demand during mid-2020. When compared to March, the benchmark prices of copper and nickel had elevated by 40% respectively as of November, for which the growth was derived from the COVID-19 pandemic and the temporary supply postponement subsequently, where the recovery speed of China that exceeded the anticipation, as well as the increasingly high hope placed on the vaccine, have also contributed to the rising prices.
Commodities are receiving substantial degree of popularity under the anticipation on a global economic rebound, sluggish US dollars, and a rising inflation rate. Goldman Sachs predicts the commodities to enter a new structural bull market in November, and believes that stimulation programs that include China’s new five-year plan, European Green Deal, and the program proposed by elected president Biden for the US, may likely generate similar impact to Chinese infrastructures in 2000.
6 Chinese-funded banks even announced the suspension of opening new accounts for investment products of precious metals since November 28th due to the severe fluctuations seen in global and Chinese precious metal prices.
Developers commented that mine development under the shortage of precious metals will not be initiated hastily as prices and demand must be continuously observed to decide on the stability and urgency. Analysts believe that green energy policy will not be easily fulfilled, and with the numerous economic uncertainties after the pandemic, thus a composed analysis on the actual demand between the ideal and the real world is essential.
(Cover photo source: Flickr/James St. John CC BY 2.0)
