Sprott is a Toronto-headquartered asset manager specializing in precious metals and critical materials (NYSE/TSX: SII), tracing its roots to Sprott Securities founded by Eric Sprott in 1981 and now led by CEO Whitney George. It runs physical gold, silver and uranium trusts, ETFs, active strategies and resource lending, with about $65bn in AUM. The Insights column carries monthly commentaries and white papers on uranium, gold, silver, copper and critical materials by Paul Wong, Jacob White and John Hathaway (ex-Tocqueville gold manager) — note the house's structurally bullish commodity stance, as it sells the corresponding trusts and ETFs.
This report says platinum is currently very cheap compared to gold and palladium (a metal used in car exhaust systems), but its price might rise. The reasons: palladium is so expensive that carmakers may switch to cheaper platinum; also, hydrogen fuel-cell cars (a clean vehicle type) need platinum, boosting future demand. For regular investors, this means platinum could be a good buy, but watch out for supply risks from South Africa, the top producer. Worth reading because it uses data and history to explain why platinum might be undervalued.
Sprott Research Series Part I: Platinum The report highlights that platinum prices have remained weak for years, falling to $791 per ounce as of August 24, approaching a decade low, while palladium has broken through $1,000. The core argument is that platinum is severely undervalued: the platinum-to
This chapter is the first part of the Sprott platinum series research, serving as a foundational introduction aimed at laying the groundwork for subsequent in-depth analysis of supply and demand fundamentals. The report focuses on the prolonged weak performance of platinum prices, contrasting sharply with the strength of palladium, and suggests that the current market may be undervaluing platinum.
The report's core investment thesis is: Platinum is currently severely undervalued, with its relative prices to gold and palladium at historically extreme lows, and this dynamic may be shifting in platinum's favor. The counterintuitive judgment lies in the fact that, although palladium has benefited more from automotive demand in recent years, the report argues that this trend may reverse, presenting an opportunity for platinum to rise.
The report supports its thesis through three dimensions: price ratios, supply-demand structure, and industry trends:
1. Extreme Price Ratios:
2. Differences in Supply and Demand Fundamentals:
3. Changes in Automotive Industry Demand:
Comparative Data Table:
| Metric | Platinum | Palladium | Gold |
|---|---|---|---|
| Current Price (August 24, 2018) | $791/oz | >$1,000/oz | Approximately $1,200/oz (estimated) |
| Annual Production | Approximately 175 tons | Approximately 200 tons | Approximately 3,000 tons |
| Major Supply Countries | South Africa (75%) | Russia, South Africa (each ~50%) | Diversified across multiple countries |
| Automotive Demand Share | Declining due to diesel vehicle drag | 75% (8.39 million oz used in 2017) | Not applicable |
| Historical Price Relationship | Was 2-4 times palladium | Lower than platinum | Platinum/gold ratio often at 1.0 |
The report does not mention specific listed companies but involves the following assets and regions:
The report's implications for investors are clear: Current platinum prices are at a decade low, undervalued relative to both gold and palladium, and supply-demand dynamics may shift in its favor. Investors should focus on:
This chapter focuses on the unique demand prospects for platinum in hydrogen fuel cell electric vehicles (FCEVs) and the potential structural shift in the automotive catalyst market triggered by the reversal of platinum and palladium prices. The report notes that while palladium has historically dominated gasoline vehicle catalyst demand due to its price advantage, its current price has far exceeded that of platinum, potentially prompting manufacturers to switch back to platinum.
The author argues that platinum is at a demand inflection point: hydrogen fuel cell vehicles will generate incremental demand, while excessively high palladium prices will drive a shift from palladium back to platinum in gasoline vehicle catalysts. This shift differs from the previous cycle—the last one was "replacing platinum with palladium to save costs," whereas this cycle is "a forced switch to platinum due to palladium supply shortages."
1. Hydrogen Fuel Cell Demand:
2. Platinum-Palladium Price Reversal:
3. Historical Comparison:
4. Supply-Demand Balance: