Platinum and Palladium Investing: Catalysts, Fuel Cells, and Transition Risk

Platinum group metals (PGMs) — platinum, palladium, rhodium, and their rarer cousins — occupy a unique position in commodity markets. Produced in tiny quantities compared with gold, silver, or base metals, they are essential catalysts in vehicle exhaust treatment and potentially important materials for the hydrogen economy. Yet the dominant current demand driver — catalytic converters — is structurally threatened by the transition to electric vehicles. This creates a fascinating investment dynamic: a long-run demand destruction story in conflict with a short-run supply constraint and a potential new demand source in fuel cells.

The PGM Metals Explained

Platinum is a dense, corrosion-resistant, silvery-white metal. Historically it was rarer and more expensive than gold. Key applications include:

• Catalytic converters for diesel vehicles (oxidises unburnt hydrocarbons and carbon monoxide)
• Jewellery (particularly in Asia)
• Chemical processes (nitric acid production, refining)
• Hydrogen fuel cells (the most efficient proton exchange membrane fuel cell catalyst)
• Medical devices (implants, cancer treatment drugs — cisplatin)

Palladium has similar catalytic properties but is lighter. It became the preferred catalyst for petrol (gasoline) vehicle catalytic converters because of its higher activity at lower temperatures. Applications:

• Catalytic converters for petrol vehicles (the dominant demand use)
• Electronics (multi-layer ceramic capacitors, hard disk drives)
• Dental alloys
• Chemical processing

Rhodium is the rarest and most expensive PGM. It is used primarily in three-way catalytic converters alongside platinum and palladium to reduce nitrogen oxide emissions. Its market is tiny (approximately 1 million troy ounces produced annually), making it subject to extreme price volatility.

The Dramatic Palladium Price Cycle

Palladium underwent one of the most remarkable commodity price cycles of recent decades. After trading below platinum for most of history, palladium surpassed platinum's price in 2017 and continued rising, peaking above $3,000 per troy ounce in early 2022 — more than double the platinum price at the same time.

The cause was supply-demand imbalance. Tightening vehicle emissions standards globally (Euro 6, EPA Tier 3) required more palladium loading per vehicle. Supply growth was constrained — particularly after the 2021 flooding of Norilsk Nickel's Oktyabrsky and Taimyrsky mines and ongoing South African supply disruptions. The physical market ran into deficit for several consecutive years.

From 2022, the dynamic reversed. EV sales began to reduce the addressable market for petrol catalytic converters. Russian production from Norilsk Nickel continued despite sanctions concerns. And some substitution of platinum for palladium in catalytic converters — driven by the large price differential — began. By 2025, palladium had fallen back below platinum.

Rhodium moved even more violently — rising from approximately $600/oz in 2016 to over $29,000/oz at peak in 2021 before collapsing back to below $5,000/oz by 2024. This volatility reflects the tiny market size and the absence of investor inventory that might smooth prices.

Supply Concentration: South Africa and Russia

PGM supply is extraordinarily concentrated.

South Africa produces approximately 70–75% of the world's platinum and around 35–40% of palladium. The Bushveld Igneous Complex — a vast geological formation in the north of the country — contains by far the world's largest PGM reserves. The industry is dominated by Anglo American Platinum (Amplats), Impala Platinum (Implats), and Sibanye-Stillwater.

South African PGM mining faces structural challenges: deep, labour-intensive operations; high energy costs (compounded by South Africa's electricity crisis — Eskom load-shedding disrupted operations repeatedly in 2022–2024); industrial relations challenges; and rand currency volatility.

Russia produces approximately 40% of the world's palladium, primarily from Norilsk Nickel's operations in the Norilsk-Talnakh region in Siberia. The 2022 invasion of Ukraine and subsequent Western sanctions created uncertainty about Russian palladium supply — though Russian PGMs were not formally sanctioned by Western countries (unlike Russian oil and gas) partly because of the supply importance. Norilsk Nickel faced reputational pressure but continued selling to willing buyers.

Sibanye-Stillwater (SBSW — JSE/NYSE ADR) operates the Stillwater PGM mine complex in Montana — one of the few significant PGM mines outside South Africa and Russia. Stillwater produces platinum and palladium but at higher cost than South African operations.

The EV Transition: Demand Destruction Risk

The most significant long-term risk for PGM investors is the structural decline in catalytic converter demand as the automotive fleet transitions to electric vehicles. Battery EVs require no catalytic converter — there are no exhaust gases to treat.

The pace of this transition determines the pace of demand destruction:

• If EVs reach 50% of new car sales globally by 2035, and if hybrid vehicles (which still require catalysts) make up much of the remainder, the decline in PGM demand may be gradual.
• If EV adoption accelerates faster than expected, the demand fall could be sharper.
• If regulatory rollback or slower EV adoption extends ICE vehicle production, PGM demand is supported for longer.

The key uncertainty is the timeline, not the direction. Most analysts expect PGM demand from vehicles to be materially lower in 2035 than in 2024.

Platinum and the Hydrogen Fuel Cell Opportunity

The partial offset to catalytic converter demand destruction is platinum's role in hydrogen fuel cells. A PEM (proton exchange membrane) fuel cell — the type used in hydrogen-powered vehicles such as the Toyota Mirai and Hyundai Nexo — requires a platinum catalyst. Hydrogen trucks, buses, trains, and potentially ships are also being developed.

Platinum loading per fuel cell varies but is broadly similar to (or somewhat higher than) the platinum loading per catalytic converter. If hydrogen fuel cell vehicles achieve mass adoption, they could offset a significant portion of the catalytic converter demand loss. However, this depends on hydrogen infrastructure development, cost reduction, and policy support — timelines are uncertain.

The hydrogen fuel cell story also applies to stationary fuel cells for power generation (Bloom Energy, Doosan) and portable power applications.

Investment Routes

Physical ETPs

iShares Physical Platinum ETC (PPLT — London-listed): physically backed, holding platinum allocated in a custodian vault. This is the most straightforward route to platinum exposure for UK investors.

iShares Physical Palladium ETC (PALL — London-listed): similar structure for palladium.

WisdomTree Physical Platinum (PHPT) and Physical Palladium (PHPD): alternatives with competitive fees.

Physical ETPs provide direct price exposure without futures roll costs. Storage fees are included in the annual expense ratio.

Mining Equities

Anglo American Platinum (AMS — JSE): accessible through South African equities platforms or the London OTC market. The largest platinum producer by volume.

Impala Platinum / Implats (IMP — JSE): second-largest South African producer, with operations at Rustenburg and Marula.

Sibanye-Stillwater (SBSW — NYSE ADR or JSE listed): gold and PGM producer, including the Stillwater PGM complex and South African PGM operations. NYSE ADR makes this accessible to international investors.

Norilsk Nickel (MNOD — OTC for Western investors since 2022 sanctions): access has become complicated by sanctions and restricted listings. Most Western brokerages have suspended normal dealing.

Investing in South African miners adds exposure to rand currency risk, South African political and regulatory environment, and electricity supply uncertainty — all material risks that have driven significant share price volatility.

UK Tax Treatment

Physical platinum and palladium ETPs are treated as shares for CGT purposes. Gains are subject to capital gains tax at standard rates (18%/24% for basic/higher rate taxpayers as at 2026). Physical PGM bullion coins may qualify for CGT exemption if they are HMRC-recognised legal tender (certain Britannia and Sovereign coins in platinum exist). Professional advice is recommended.

Rhodium: For Information Only

Rhodium has no investable ETP in standard accessible format — the market is too small and illiquid. Physical rhodium can be purchased from dealers but involves very wide bid-offer spreads and difficult resale. Rhodium exposure is effectively only accessible through diversified South African mining equities. Given its price volatility and illiquidity, it is not a suitable investment for most HNW portfolios without specific expertise.

Risks

EV transition pace. Faster-than-expected EV adoption destroys catalytic converter demand faster.

South African operational risk. Power cuts, strikes, and safety incidents regularly disrupt production.

Russian sanctions escalation. Although PGMs have not been formally sanctioned, any escalation that interrupts Russian palladium supply could cause sharp price spikes.

Substitution within PGMs. Engine manufacturers can substitute platinum for palladium or vice versa over multi-year development cycles, shifting relative prices.

Hydrogen timeline uncertainty. The hydrogen fuel cell demand offset may take 10–20 years to materialise at meaningful scale.

The value of commodity investments can fall as well as rise, often sharply. Past performance is not a reliable guide. This guide is for information only and not investment advice. Always seek professional advice.

How Global Investments Can Help

Platinum group metals are specialist commodities that reward careful analysis of supply dynamics, transition risks, and portfolio fit. We can help you assess whether PGM exposure is appropriate for your portfolio and identify the most suitable vehicle. Contact our team to explore further.