JOHANNESBURG (miningweekly.com) – There are two things that have to happen to boost platinum. One is that there will have to be ultimately further reductions in South African platinum production which is likely to happen over the next three to five years. But the bigger aspect that needs to happen more immediately is there has to be a change in investor sentiment.

That is the view of Jeffrey Christian, the managing partner of CPM Group of New York, who has been analysing the platinum market for decades.

Speaking to Mining Weekly Online in an exclusive interview in Johannesburg, Christian outlined how investor bearishness on platinum comes in waves, with another wave emerging since the second quarter of this year. (Also watch attached Creamer Media video).

Investors, he said, were not getting good messages about platinum, only bad messages or confusing messages.

The price decline since the first quarter of this year reflects investor bearishness towards platinum.

“They’re giving up the ghost on automotive demand and they think that automotive demand for platinum’s going away almost immediately. It’s not. It’s going to be around for decades, but that message isn’t getting across.

“There’s an anti-diesel sentiment. The two big markets are India and Europe for diesel passenger cars and both of them are getting rid of subsidies,” he pointed out.

Diesel market share in Europe has risen from 15% in 1990 to some 54% five years ago but fell last year to 44% last year.

One of the causes of bearishness towards platinum is that as on January 1, diesel vehicles lost certain subsidies in Europe, resulting in a 17% year-on-year decline in diesel market share in Europe in the first quarter.

“So, people look at it and say well it was 44% of the European market in 2017 and 37% in the first quarter and they draw this line and they say that diesel passenger cars are going to be gone in three years. That’s not true. The diesel market share had spike down because of the disappearance of some subsidies and now 37% is the new norm,” he added.

A large number of diesel passenger vehicles remain but if you look at the use of platinum and diesel catalysts, the big growth over the last ten years has not been in passenger cars, but large lorries and buses, which is continuing to grow in dynamic market conditions.

“You also have diesel locomotives now using catalysts and the next big step is diesel ships at sea. They use 4% of the world’s petroleum but they produce 40% of the pollution caused by petroleum use,” Christian noted.

Pressures are building for ship emissions to be curbed with the help of platinum, which would amount to a substantial and price inelastic use of the metal.

“If you look at the use of platinum in diesel catalysts, it’s actually pretty strong, but you don’t get that message out to investors.

“They just look at the headlines and they see that 44% to 37% drop in market share and passenger cars and they just extrapolate it,” Christian pointed out to Mining Weekly Online.

The CPM Group is a commodities market research, consulting, financial advisory and asset management firm with strong South African links and precious metals oversight.