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Platinum - Applications

Apr 3 2002

Topics Covered

Background

Platinum (Pt) is primarily an industrial metal. It is a critical material for many industries and is considered a “strategic metal” by the US Government as a military resource. It is estimated that about 20% of the products purchased by modern consumers either contain platinum or use it in production. Total demand for platinum falls into eight broad categories:

• Automotive – used in catalytic converters, spark plugs, and sensors

• Jewellery – as a substitute for gold

• Chemical processing – also as a general catalyst

• Electrical/electronics – for high-temperature and non-corrosive wires and contacts

• Glass – dies and process technology

• Petroleum refining – as a catalyst for crude oil cracking

• Dental/Medical – equipment and reconstructive

• Investment – bullion and coins

Automotive

Automotive demand for platinum consumes a large share of platinum production. Platinum is the active element in catalytic converters that convert unburned hydrocarbons into carbon dioxide and water vapour. Other automotive uses include oxygen and ozone sensors for antipollution subsystems. Recently, platinum is being used as an electrode material in long-life spark plugs. Being one of the largest consumers of the metal, platinum demand is highly correlated to automotive industry cycle, and therefore price.

Automakers are aggressively experimenting with ways to eliminate expensive platinum-based emission-control components. New “lean-burn” technologies are being developed by auto manufacturers to reduce or eliminate the need for catalytic converters. These techniques use sophisticated computer control of engine parameters to reduce emissions. Such breakthroughs would substantially reduce platinum demand and put downward pressure on the price of the metal. Other challenges to platinum in autocatalyst use come from its sister element palladium. Palladium can be used as a substitute along with other platinum group metals as a catalyst agent. Although palladium is not quite as effective as platinum, it will be substituted if the price of platinum rises too high.

On the bullish side, new automotive uses for platinum are on the horizon that could substantially increase demand for the metal. Manufacturers are experimenting with fuel-cell power plants for electric cars. These fuel cells utilize platinum to catalyse a chemical reaction using hydrogen that creates electrical energy but generates no harmful emissions. Government emissions and fuel-efficiency mandates are accelerating research in this area. It will probably be at least a decade before fuel cell automobiles enter widespread use.

Jewellery

Platinum has become a very popular choice for modern jewellery, displacing significant gold demand. Its hardness and durability allows it to be used in purer form for secure stone settings. It is much superior to silver because of its resistance to oxidation and discoloration. Its rich hue and reflectivity enhances the brilliance of precious stones. Platinum is hypoallergenic which makes it the best jewellery choice for people who suffer reactions from other metals or 14k (alloyed) gold.

Platinum jewellery has been particularly popular with Asian consumers. Many Asians feel that platinum has a more pleasing contrast with the Asian skin colour than other metals. Other ethnic groups have started to purchase platinum for similar reasons. Platinum also seems to have a marketing advantage over gold or silver. Products and awards with the “Platinum” designation are typically considered superior those labelled “Gold” or “Silver”. This gives platinum jewellery items additional prestige.

Chemical Processing

Platinum is used as a catalytic agent in processing of nitric acid, fertilizers, synthetic fibers, and a variety of other materials. In catalytic processes, the catalyst material is not consumed and can be recycled for future use. This makes chemical demand for platinum quite volatile. Platinum is essential in many of these processes and there are few satisfactory substitutes.

Electronics

New uses for platinum in electronics are coming at a fast pace. Traditionally, platinum has been used in thermocouple devices that measure temperature with high accuracy. Newer thin film optical and temperature-sensing systems use platinum silicide compounds in a variety of products. Platinum is also employed in wires and electrical contacts for use in corrosive or high-voltage environments. Platinum is a component in magnetic coatings for high-density hard disk drives and some of the newer optical storage systems.

A few years back, platinum surged into the spotlight when two researchers, Pons and Fleischmann, claimed to have generated a “cold fusion” reaction using platinum. This cold fusion technology was thought at the time to be a major breakthrough in atomic power generation. The original work utilized palladium, but subsequent testing showed similar results with platinum. After publishing their controversial work, Pons and Fleischmann were unable to reproduce the reaction to the satisfaction of the scientific community. Should cold fusion become a reality, it would create significant demand for both metals. Although cold fusion may never be practical, platinum investors should keep an eye on this area.

Glass

Platinum dies are extensively used in glass production. Its hardness and high melting point make it ideal for this difficult high-temperature process. Much platinum is used in fibreglass production. The recent introduction of glass fibre communications technology is a new driver for platinum demand. Although the fibre-optic market is now in a cyclical recession, it is expected to recover along with the associated platinum demand. Glass production is a relatively small component of total demand, but represents a high growth area.

Petroleum

This is another use for the catalytic properties of platinum. The petroleum industry uses the metal in a mesh or gauze form in crude oil refining. Platinum use in petroleum refining follows global demand for refined crude oil products. Other technologies exist to perform crude oil separation but catalytic processes using platinum and palladium are much more environmentally friendly. As more refineries are built and updated, expect platinum use in petroleum refining to rise. Also, less developed countries are being pressured to improve environmental standards. Refineries in those areas will ultimately be converted to catalytic processing, further boosting demand for platinum group metals. As in other catalytic processes, platinum is not consumed and is aggressively recycled and reused. This makes petroleum industry demand highly volatile.

Investment

Investment demand for platinum is a wildcard. Demand for investment-grade metal has been extremely volatile over the last ten years. In the year 2000, investment demand actually went negative as hoarded supplies were dumped onto the market. Platinum is available in coin and bar form for investors and speculators. The US Mint offers a set of “Platinum Eagle” coins that contain 1.0 oz, .5 oz, .25 oz, and .1 oz .9995 pure platinum. These coins are relatively scarce and have only been produced since 1997. Australia and Canada also produce platinum coins for investment consumption. Larger investors and end-users usually purchase bars or ingots. These are much more efficient and have lower price premiums to bullion, but may require assay when reselling.

Primary author: George Paulos

Source: Courtesy of Freebuck.com

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