Platinum Market Squeeze: Tariffs and Speculation Fuel Price Surge

The platinum market has tightened to unprecedented levels in recent days as tariff fears and speculative buying are pulling metal from key London and Zurich markets into U.S. warehouses. Spot platinum prices have surged to fresh record highs following a record-breaking run last month, while the implied cost of borrowing the metal for one month has hit its highest level since data began in 2002. Last week saw the second-highest inflow of platinum into facilities linked to the NYMEX. U.S. President Trump's volatile trade threats led to more than 500,000 ounces of platinum flowing into U.S. warehouses earlier this year to capture tariff-panic driven premiums, a wave of shipping similar to what industrial metal markets like copper have experienced. ## Impact of Tariffs and Speculation Spot platinum prices are up nearly 60% year-to-date. An unusual scarcity of platinum in the dominant London over-the-counter spot market has driven annualized one-month borrowing costs for the precious metal to nearly 40%. For most of the time, that rate is closer to zero. Although platinum prices edged lower on Tuesday, there's little sign the market's tightness is easing. Jonathan Butler, head of business development at Mitsubishi International in London, wrote in a report that the price structure known as 'backwardation' -- where buyers pay higher prices for the nearest deliveries to secure supply -- has only intensified this month. "Tariff-related dislocations, physical buying from Asia and speculative interest have collectively contributed to the extreme market tightness," he said. "The difference now is the depth of the backwardation and how widespread it is along the curve, worse than at any time in over 20 years." ## A Look at Borrowing Costs According to Trevor Raymond, head of the industry body World Platinum Investment Council (WPIC), the rising lease rates may also be partly due to platinum users being skeptical of the sharp price rise. "Because the metal has been range-bound between $950 and $1,100 an ounce for many years, many market participants don't think this rally is sustainable and they say 'we don't need to react, we can lease the metal'," he said. Given how prohibitively expensive it is to borrow platinum now, some of those borrowers may soon end up buying the metal to end those leases rather than rolling them over. In April, U.S. platinum inventories started to decline after the U.S. announced its first tariff exemptions and prices retreated to align with those in London and Zurich. But after Trump’s surprise announcement of a 50% tariff on copper, the U.S. premium surged again. Nicky Shiels, head of metals strategy at MKS Pamp SA, said in a report that while platinum remains exempt, Trump’s copper tax “has significantly increased the tariff risk for white metals.” In addition to investment demand, platinum is also used in catalytic converters and laboratory equipment. The World Platinum Investment Council estimates that this year's supply deficit will approach 1 million ounces, further eroding already dwindling above-ground stocks.