Refinery services provider Heraeus finds in its latest precious metals appraisal that the platinum price, which currently averages $1 341/oz, will correct over the second half of the year.

The South African platinum group metal (PGM) basket price is currently more than 30% higher than at the beginning of the year, in dollar terms.

For high-cost producers in South Africa, this will ease pressure on profit margins which have been eroded over the last 18 months as PGM prices have fallen and production costs have risen.

While platinum is a major component of the revenues, the basket also includes palladium and chrome, the prices of which have also rallied.

Chrome prices have risen materially this year, which will help UG2 producers in particular. This has lifted the basket price just above the cost curve.

Should the platinum price recede in the second half of the year, as Heraeus expects, then the top of the cost curve could become marginal once again.

Platinum rose to an 11-year high last week, having surpassed $1 400/oz. Platinum prices also rose more in the first six months of the year than gold did during 2024 – the platinum price has now appreciated by 47% since January 1.

Commenting on the platinum market tightness in general, Heraeus says platinum lease rates were initially elevated at the tail end of 2024. This was related to concerns over the then unknown US tariff regime which led to physical flows into commodity exchange warehouses in the US.

Early this year, short-term platinum lease rate indicators rose above longer-dated ones, signalling that short-term availability was more of a concern than on a 12-month basis.

Additionally, the platinum futures curve has been flattening. There has been little relief on borrowing costs since.

The supply side may have been a big driver behind initial tightness in platinum, sparking the price breakout above $1 150/oz, but easing of pressure on the supply side may also be why the platinum price is forecast to trend lower in the second half of the year.

Heraeus reports first-quarter refined platinum production in South Africa is usually lower than during the rest of the year, but in the first quarter it was much lower than expected.

Data from Statistics South Africa show that PGM production had yet to recover to normal levels as of April, despite some of the disruption stemming from Valterra Platinum’s (formerly Anglo American Platinum) triennial refinery stock count, which was a temporary interruption to refined supply.

Bottlenecks in production should have eased which would reduce tightness and improve liquidity in physical platinum markets.

Chinese demand has also been cited as a key driver for the recent performance. Significant investment in large bars weighing more than 500 g and a jewellery fabrication revival in China are attracting strong imports into China from platinum-producing nations.

Alongside increased speculative trading evidenced by Shanghai Gold Exchange trading volumes, this has added fuel to the fire.

“However, we are yet to see data confirming that wholesale Chinese jewellery demand is converting to consumer purchases. This is the key to unlocking ‘real’ demand,” Heraeus states.

Export data from platinum-producing nations to China shows a jump in March and April. However, year-to-date totals are still below 2023 and 2024 levels, suggesting the recent uplift could simply be making up for lower levels during the Chinese New Year.

The increase in imports from March was not just a platinum phenomenon.

Palladium also saw a spike, making it more difficult to ascribe the jump in flows to a boost in platinum jewellery or investment alone. The June number will be a telling indicator of short-term Chinese demand, as imports in May did not capture the most recent price climb. Imports tend to be inversely related to the platinum price, so if they remain elevated, it is a sign that demand is truly growing, Heraeus notes.

“The platinum price rally is looking stretched. The market may be tight in the short term, but with normalising supply from South Africa, liquidity should improve.

“Further evidence is needed to show how demand in China responds to the price hike, and whether jewellery sales are growing faster than anticipated. Therefore, it is likely that the platinum price will correct over the second half of the year,” the company concludes.