Can the rally really last forever? A review of "the world's best-performing assets in H1": platinum

"Time flies, but platinum endures" – In the global market during H1 2025, platinum, regarded by many investors as a "substitute for gold," undoubtedly emerged as the most dazzling "star"...

As shown in the figure below, platinum prices surged by over 40% in the first half of the year, leading the gains among major global cross-asset classes.Due to increased imports in China and a decline in supply from South Africa, the major producer, coupled with a previous influx of platinum into the inventory of the New York Mercantile Exchange amid concerns over potential US import tariffs, the price of this platinum group metal soared by 36% in Q2.

In June alone, platinum prices surged by 28% as hedge funds and speculative traders piled in, marking the strongest monthly performance since 1986 and briefly touching an 11-year high of $1,432.6 per ounce.

An independent metals trader commented, "Platinum has broken out of its decade-long trading range, attracting the attention of both professional and retail investors in the process, who are starting to think, 'Hey, platinum is indeed undervalued from a fundamental perspective.'"

However, after the frenzy in Q2, many analysts and traders expressed this week that the upside potential for platinum prices may be limited.It is expected that China's platinum imports will slow down, South African production will recover, and demand from the automotive industry, a major industrial use of platinum, remains weak...

Georgii Piskov and C.V. Downie, commodity traders at Goldman Sachs, believe that the current rally in platinum may face a correction.

How did platinum become so bullish this year?

The strength of platinum in the first half of the year was actually driven by a combination of factors.

Due to concerns over potential US reciprocal tariffs on platinum in April, a significant amount of platinum was shipped to the New York Mercantile Exchange between December last year and March this year, leading to a temporary supply shortage in the market and a spike in leasing rates.

Although platinum group metals were ultimately excluded from the April tariffs, Trump ordered a new round of tariff investigations on all US critical mineral imports in mid-April, indicating that uncertainties persist.

Meanwhile, data from South Africa, the world's largest producer of platinum group metals, showed a 24% YoY decline in platinum group metal mining output in April, marking the peak of what Morgan Stanley described as an "exceptionally weak" production decline in the first four months of 2025.

Another factor driving platinum prices higher is demand from China. Customs data show that China's platinum imports reached 12.57 mt in May, compared to 11.54 mt in April, with imports continuing to rise from January to May.

Previously, research by the World Platinum Investment Council, an industry organization, showed that China's platinum jewelry processing volume increased by 26% in Q1.

A trader said these factors together constitute "explosive factors driving up prices."

Could there be trouble ahead?

However, such surges are often short-lived. As we enter H2, many analysts are questioning whether platinum has enough underlying support to maintain its strong upward momentum.

Metals Focus expects the global platinum market to face a supply deficit of 529,000 ounces this year, but even after the resulting reduction in above-ground inventory, inventory will still remain at 9.2 million ounces,equivalent to up to 14 months of demand - a fairly ample cushion.

Wilma Swarts, Director of Platinum Group Metals at Metals Focus, said that while uncertainty persists over the US's trade policy on platinum, raising import tariffs on the metal would ultimately be counterproductive, as North American supply cannot meet regional demand.

In addition, platinum lease rates, which hit a high of 22.7% in June, have now pulled back to 11.6%,reflecting a partial easing of the tightest platinum supply and demand situation.

Mine supply in South Africa is expected to show signs of recovery in H2,with global platinum mine production expected to decline by only 6% for the full year. "Southern Africa did face challenges such as rainfall, power, and water supply disruptions from January to March, but there were no major or unusual incidents," said Johan Theron, a spokesman for Implats Platinum.

On the demand side, the sharp rise in platinum prices may itself be becoming its biggest bearish factor.According to a trader, the strong momentum in China's physical platinum demand may have only lasted until early June, when prices exceeded $1,050. China's June import data, expected to be released on July 20, are projected to show a decline following very strong platinum deliveries in the previous two months.

"Platinum is highly volatile at high levels, and the market needs to see greater demand from China and ETFs to achieve sustained upward movement," Wong said.

Finally, the platinum market is actually highly susceptible to one of the most common bearish factors of the past decade - weakening demand from the automotive industry, which uses platinum as a component in catalytic converters for internal combustion engine vehicles.

The long-term pressure on platinum group metals (PGMs) from EV expansion continues, while global trade disputes further dampen the medium-term outlook for the automotive sector. Metals Focus notes that automotive production forecasters have cut their production estimates for the next four years by up to 10 million units, and this decline in automotive production will lead to weaker demand for PGMs.

Nornickel, the world's largest palladium producer, has stated that any further increase in platinum prices could prompt catalyst producers to increase their use of palladium as a substitute for platinum. The company notes that when the price spread between the two metals exceeds 30%, it will encourage such substitution.

As of Thursday, platinum was 22% more expensive than palladium.

Of course, while analysts and traders are cautious about further increases in platinum prices, they do not expect a significant correction. Many analysts believe that platinum prices will stabilize above the levels seen before the current rally, which will support miners' profits in the third year of a market moving towards a structural supply deficit.