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Shanghai Platinum Week highlights unique platinum, palladium futures innovation

World Platinum Investment Council CEO Trevor Raymond.

World Platinum Investment Council CEO Trevor Raymond.

9th July 2024

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Platinum and palladium have been spotlighted on day two of Shanghai Platinum Week, where South Africa is well represented by Minerals Council South Africa as well as platinum group metals (PGM) mining company executives.

The newly announced ingot and sponge monthly contracts offer a domestic mechanism to hedge price risk and boost the ongoing development of China’s PGMs market, which is essential to the Asian giant’s energy transition and ongoing decarbonisation efforts.

No other exchange in the world enables the delivery of sponge, which could be transformative for industrial users of PGMs, as well as automakers, as this is the main form typically used for their manufacturing purposes, Mining Weekly can report.

Chinese national futures exchange dedicated to green commodities essential for the energy transition, Guangzhou Futures Exchange, on Tuesday revealed the details of its platinum and palladium futures contracts during a keynote speech at Shanghai Platinum Week.

The new contracts, which are denominated in local renminbi yuan currency, will be the first platinum and palladium derivatives available in China, marking a highly consequential new hallmark in global PGMs marketing.

The new futures contracts represent an important shift in the way both metals are purchased, traded and how price risk is managed, particularly for domestic market participants in China, but also internationally.

Rather than the three-month contracts typically offered by other exchanges, key features of the new products include 12-month contracts, which not only bestow escalated hedging flexibility but also more frequent opportunities for settlement.

If they hold contracts to expiry, participants will be able to opt to offset the position or to take delivery of either form of the metals.

Uniquely, platinum and palladium in the form of ingots and sponge  – pure metal in powder form – as opposed to just ingots, will be accepted if delivery is required.

Other benefits of Guangzhou Futures Exchange's new futures include providing a mechanism for businesses involved in the market to hedge price risk and better manage their operations, something that is currently not freely accessible in China.

For example, the removal of price risk will allow platinum jewellery and investment product fabricators to reduce the premium charged for platinum products as well as the discount on buyback.

Guangzhou Futures Exchange platinum and palladium futures research and development lead Chen Xuanchen emphasised the impact this was likely to have on platinum and palladium markets, domestically and globally.

“Our exchange fills a gap in the Chinese market, providing the mechanisms to discover the domestic prices of platinum and palladium in China and help businesses hedge price risk, opening up working with the two metals to a greater number of market participants throughout the metal value chains.

“The ability to hedge price risk will provide a welcome boost to the ongoing development of China’s PGMs market which is essential to the country’s energy transition and ongoing decarbonisation efforts. The availability of domestic futures could potentially boost consumer confidence in both metals, increase the availability of recycled metal and further accelerate demand growth,” added Xuanchen.

World Platinum Investment Council (WPIC) CEO Trevor Raymond described the platinum and palladium contracts as a ground-breaking development for the PGMs market globally.

“Any mechanism that enhances the overall stability and efficiency of the Chinese platinum market will have significant benefits for the broader global market,” Raymond noted.

The advance arises at a particularly important time for platinum investment demand growth in China, with last year’s demand for coins and bars under 500 g in size growing 37% to 52 000 oz, with an additional 134 000 oz of demand from platinum bars in the 500 g to 1 kg range.

“Importantly, the ability to reduce business risks and increase platinum’s competitiveness will potentially act to accelerate the pace of growth of platinum investment in China.

“Platinum investment is a natural mechanism for attracting metal into any geography, providing a pool of future liquidity to supply future demand. For a strategically important metal, like platinum, which is an essential ingredient for the future hydrogen economy and global decarbonisation, this is likely to prove particularly important for major end-users, such as China, that do not have meaningful domestic sources of supply beyond recycling,” added Raymond.

China Precious Metals Industrial Committee deputy chairperson Jiang Bian pointed out that the announcement was one of the highlights among a variety of significant activities at this year’s Shanghai Platinum Week, including the China PGMs Market Summit, where industry experts were discussing trends and future directions for PGMs and their markets.

“It underscores the important role of Shanghai Platinum Week as a platform for industry innovation and collaboration,” added Bian.

Following the event, international participants will be taken to meet a number of the hydrogen-related companies in the Shanghai region, and they will also be given an opportunity to meet and converse with Chinese policymakers.

The Guangzhou Futures Exchange will finalise the contract specifications and date of listing in the coming months. With a commitment to excellence and transparency, the exchange is set to become a cornerstone in the global platinum and palladium trading ecosystem.

Shanghai Platinum Week, co-organised by the WPIC, China Gold Association Platinum Committee, and the Precious Metals Industrial Committee, China Material Recycling Association, continues until July 11, featuring a range of keynote speeches, seminars, exhibitions, and corporate events.

Members of the WPIC, which was established in 2014, include Anglo American Platinum, Implats, Northam Platinum, Sedibelo Platinum and Tharisa.

Edited by Creamer Media Reporter

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