"Precious metals are not used because they are cheap," according to Matthew Turner, market intelligence manager at Valterra Platinum, one of the world’s leading platinum group metals (PGMs) producers. "By weight, they are thousands of times more valuable than, say, oil or base metals – they are used because they are good at what they do. They don't have that many substitutes."

Mainly for this reason, Turner doesn't expect China's recent decision to remove a 13% value added tax (VAT) exemption on platinum imports to trigger a slump in demand from the country, which consumes 30% of the metal used in a plethora of industries.

"Demand is inelastic to price. If prices go up by say 5%, that doesn't mean China will use 5% less, meaning this price increase shouldn’t have a long-term impact," he said.

Turner's comments come as investors have become enamored with platinum – its value has soared in 2025 due factors like a three-year structural deficit and strong appetite for gold, whose price it tends to closely track.

As of early December, platinum prices had climbed almost 80% this year to nearly $1,600 per ounce, eclipsing its close cousin palladium's 70% jump and outpacing gold's 58% gains respectively. 

Platinum has many industrial uses. The biggest consumer is the automotive industry, mainly for catalytic converters in diesel vehicles, though the chemicals and energy industries are also big buyers, employing it for fertilizers, premium glass and fiber optics. The jewelry industry uses the white metal to make watches, rings and necklaces, primarily in China and North America, but also increasingly in India.

Edward Sterck, research director at the World Platinum Investment Council (WPIC), expects 2025 to end with an 850,000 ounce deficit as supply lags demand. However, he sees the deficit gradually narrowing by 2029 when it could come in at 486,000 ounces amid a bounce in recycling activities.

"Demand could be a little shy of 8 million ounces this year while supply will stay flat in the range of 7.2 to 7.3 million ounces," according to Sterck. 

"Recycling has been rather suppressed in the past three years but we are seeing a recovery supported by higher prices which is why we see a smaller deficit in the future," he added.

The bulk of the material will likely come from the automotive sector where 27 million cars are set to be scrapped annually, according to Global Car Recycling Day. Producers can repurpose the platinum, palladium and rhodium used to make the catalytic converters found in cars' exhaust pipes, helping boost inventory.

Wilma Swarts, director of PGMs at precious metals consultancy Metals Focus, said a lack of expansion capital investment, particularly in South Africa (which accounts for 70% of global output) "is putting a drag on mine supply and exacerbating the deficit."

South Africa has suffered from flooding due to heavy rainfall at the start of the year as well as unplanned maintenance brought about by equipment failure due to the significant power outages in the past. In other top producing countries like Russia or Zimbabwe, there is a lack of any significant, financially viable brownfield or greenfield projects that could meaningfully replace the depletion seen in existing aging assets in the foreseeable future.

This year's staggering price rise has stemmed from a combination of multi-year supply-demand imbalances, as well as the gold price rally.

“Even though the fundamentals are robust for platinum, a lot of the lift it’s experiencing is associated with what we’re seeing across the commodity complex," Swarts said. "Platinum has always had both an industrial and investment underpin to it, though for the last two years platinum seemed to have disconnected from gold and traded range bound despite the higher gold price. More recently as explained before, the correlation has been restored."

In China, the high gold price saw some jewelry manufacturers switch a portion of their inventory to platinum jewelry.

Swarts said jeweler demand has broadened beyond China, which has historically been the dominant jewelry consumption region. Strong growth in the U.S., Europe and notably India has meant that demand is more evenly distributed across all regions.

"In the past two to three years, we have seen India grow tremendously," Swarts said. "If we think back to 2013, demand was around 38,000 ounces and is now closer to 200,000 ounces."

Conversely, platinum purchases from the auto industry are declining as a result of the electric vehicle (EV) revolution, though rising platinum substitution against more expensive palladium for gasoline converters is helping offset some of the losses.

Analysts say the hydrogen economy, with its platinum usage set to grow at a faster pace than in other industries by 2030, could also provide a buffer against EV-led headwinds. 

Uptake is forecast to increase to 875,000-900,000 ounces by 2030, according to the WPIC. Fuel cell electric vehicles (FECV), especially for heavy-duty trucks and buses, and so-called electrolyzers needed to power green hydrogen (energy made from water and renewable sources), will drive growth, alongside stationary or backup power facilities, it adds.

Amid these changing conditions, there’s been a strong increase in demand for platinum derivatives to manage price risk. CME Group Platinum futures average daily volume (ADV) rose 22% to 38,000 contracts as of the third quarter. Meanwhile, a record-breaking 9,500 Platinum options contracts were traded on October 24.

“We're seeing increased interest from firms across the physical supply chain, from producers to major consumers in the oil and gas industry,” said Yang Lu, Senior Director of Metals Products at CME Group.

Swarts said oil and gas firms can be big buyers of platinum and could benefit from using the futures exchange to mitigate risk. Oil and gas companies use platinum and palladium as catalysts in the refining process during the conversion of crude oil to gasoline, diesel and related petrochemical products.

"There is a significant amount of platinum locked up in the petroleum and petrochemical refining process," said Swarts. "Whether its price exposure from new plant expansions, selling it if a plant decomissions or topping up of existing catalysts during a change out process,” the petroleum refiners can be very sensitive to pricing.

Derivatives can also help refiners manage price risk and assess whether to lease (borrow) the metal or purchase it directly, Swarts added. Amid market tightness, platinum lease rates have surged to historic highs which have likely triggered some companies to increase direct purchases/ownership of metal.

Looking ahead, Turner noted he will keep a close eye on the automotive powertrain to better understand future demand, especially as the market is in flux.

"There is a shift to Battery Electric Vehicles (BEVs) that don't use PGM catalysts which is a negative [for platinum] but this year, we are seeing a divergence in this trend," Turner said. "China has more rapidly developed BEVs as well as hybrid vehicles whereas the U.S. has gone the other way. You have seen sales falling at Tesla and the traditional carmakers announcing they will produce hybrid and other combustion cars for longer than anticipated."

Added Turner: "And of course, we have seen political changes in the U.S. like the tax credit removal and the EPA's [Environmental Protection Agency] decision to step back from CO2 regulation. These risk further deceleration."

The global economic outlook, coupled with lingering geopolitical tensions, will also likely impact platinum.

"One of the drivers for PGMs has been that the global economy has proven more resilient than expected and tariffs have not been such a big deal," said Turner. "But that could change. People are watching things like corporate credit and the U.S. labor market for signs of a slowdown. This could be a risk for PGMs as their performance is linked to industrial demand."

On top of recycling, could anything else curb the production shortfall?

Sterck said roughly 3.2 million ounces of platinum are held in exchange traded funds (ETFs), so if prices continue to rise, some people may be encouraged to take profits and unwind their positions. 

If tariff tensions subside, some of the above-ground stocks people accumulated in recent years amid heightened uncertainty could also be offloaded, helping shore up supply, he concluded.

As these dynamics continue to unfold, platinum’s role in both industry and in investment portfolios will likely be top of mind for market participants.