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Commodity Trading: Platinum Futures

Supply / Production Considerations

Platinum is the rarest of all the precious metals. Often referred to as "white gold", Platinum is 16 times more rare than Gold and 100 times more rare than Silver. The annual supply of Platinum is 118 tons, which is equivalent to only 6% (by weight) of the western world’s annual Gold production and less than 1% (by weight) of the world's annual Silver production. To put the supply of Platinum in perspective, more than twice as much steel is poured each day in the United States, than Platinum is produced in the world each year!

Platinum mining is a long and involved process. Roughly 10 tones of ore must be extracted at depths often more than a mile with temperatures in excess of 120 degrees Fahrenheit just to produce one pure troy ounce of Platinum. Because of the depths and harsh conditions at which Platinum is found. Mining takes approximately six to nine months from extraction through to processing.

The world’s supply of Platinum is highly concentrated. Platinum occurs as a native alloy in placer deposits or, more commonly, in lode deposits associated with nickel and copper. Nearly all of the world’s supplies of Platinum are extracted from four countries the Republic of South Africa (79%), Russia (12%), United States (1.6%), and Canada (5.6%).

A small percentage of the floating supply of Platinum is made available through recycling and reclamation. This trend is decreasing as price pressures have made these processes less profitable. With Platinum prices falling over the last several years, fewer companies are investing in the equipment to do these processes on a large scale.

Platinum is also a strategic metal held by the Department of Defense. The government has been unloading some of this supply in recent years, as well as leasing it to US for use in Platinum coinage, though the US mint has to return all of the Platinum loaned by 2003. Other major aboveground reserves are held in South Africa and Russia. Russia has the largest above ground supply of Platinum (by some estimates), but the newly formed government there after the fall of communism has sold off much of its strategic stockpile. The political instability in Russia and economic hardships in this region has made the transportation of Platinum virtually impossible, thus making this stockpile almost inconsequential for the immediate future.

The supply/demand relationship of Platinum can best be described as tight. By some estimates, the world’s stockpiles of Platinum can only keep up with demand for 2 years (versus 25 to 30 years for gold), so any disruptions in mining operations tend to have an exaggerated effect on the price of Platinum.

SPONSORED BY:

Commodity Trader's Almanac 2008
Scott W. Barrie
Best Price $26.37
or Buy New $26.37

Disclosure of Risk: The risk of loss in trading futures and options can be substantial; therefore, only genuine risk funds should be used. Futures and options ARE not suitable investments for all individuals, and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

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