Platinum has experienced a significant surge in price recently, reaching a 12-year high of over $1,600 per ounce. This increase is largely attributed to mining disruptions in South Africa, which is the world’s largest producer of platinum. The country’s platinum industry has faced numerous challenges, including severe weather conditions, power outages, and chronic underinvestment, all of which have contributed to a decline in production.
South Africa’s platinum mines have been particularly affected by heavy rainfall and flooding in the early part of 2025. These weather conditions have exacerbated existing issues such as high electricity costs and dwindling reserves, further reducing the country’s ability to meet global demand. The World Platinum Investment Council (WPIC) predicts that global platinum mine supply will decrease by 6 percent in 2025, resulting in a market deficit of approximately 850,000 ounces. This marks the third consecutive year of a supply shortfall, underscoring the persistent tightness in the platinum market.
The structural decline in platinum supply from South Africa is not expected to improve significantly in the near future. Despite rising platinum prices, the investment needed to develop new mining operations or sustain existing ones is lacking. Major South African producers have closed shafts and delayed new investments due to persistently low platinum group metal (PGM) prices in previous years. This lack of investment means that even if platinum prices continue to rise, it may not be enough to alleviate the production pressures facing the industry.
On the demand side, platinum continues to benefit from strong industrial applications, particularly in the automotive sector where it is used in catalytic converters. The metal’s role in emerging green technologies, such as fuel cells and hydrogen production, further supports its demand. Additionally, China has increased its imports and boosted platinum jewelry production, taking advantage of platinum’s discount to gold. Investment demand for platinum has also surged, driven by its perceived undervaluation and stockpiling amid global trade uncertainties.
The impact of mining disruptions in South Africa is not limited to the domestic market. The global platinum market is feeling the effects of reduced supply, leading to higher prices and increased speculation about future deficits. The WPIC expects these deficits to continue annually through 2029, suggesting that the current market conditions will persist for several years.
In response to the rising platinum prices, new mining projects are being initiated in South Africa. Companies like Ivanhoe Mines are advancing projects that were previously stalled due to weak prices. These developments could help stabilize South Africa’s platinum output, but their success will depend on how global prices evolve in the coming years.
The surge in platinum prices has also led to increased lease rates, signaling tight supply conditions. Lease rates have hit over 20 percent, reflecting the market’s anticipation of ongoing shortages. This environment is favorable for investors, as the combination of strong demand and constrained supply supports higher prices.
Despite these positive developments for platinum, there are potential risks. The surge in platinum jewelry production in China, for example, may not translate into increased retail sales. If the manufactured jewelry does not sell well, it could be remelted and returned to the market, potentially weighing on prices. Additionally, fluctuations in gold and silver prices, as well as changes in the value of the US dollar, can influence platinum prices in the short term.
Overall, the recent spike in platinum prices is directly linked to mining disruptions in South Africa, coupled with strong demand from various sectors. As the global market continues to face supply deficits, platinum is likely to remain a valuable commodity, especially in the context of the global energy transition.