Platinum crunch deepens as US and China scramble for supply
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The platinum market is experiencing one of its sharpest supply squeezes in more than a decade. Years of consistent deficits have steadily eroded available stocks, but the pace of depletion accelerated in 2025 as the United States and China increased purchases. In major trading hubs such as London and Zurich, banks report difficulty sourcing the metal for physical delivery. This tightening has pushed borrowing costs to levels rarely seen in the precious metals market.
Analysts estimate the global platinum deficit will reach about 966,000 ounces this year, the third consecutive year of shortfall. Above-ground inventories are estimated to cover only three months of demand, compared with over a year’s coverage in early 2020. Competition for the remaining supply has intensified as Western investors and Asian jewelers seek holdings before prices climb further.
Soaring prices as inventories vanish
Platinum’s scarcity has driven a sharp rise in prices. Futures reached an 11-year high above $1,432 per ounce in July, capping a quarterly gain of 36 percent. Year-to-date, prices are up about 45 percent, making platinum one of the best-performing major commodities of 2025.
The rally has been fueled by more than investor optimism. Lease rates, the cost of borrowing physical platinum, briefly exceeded 35 percent in July before easing to just above 10 percent in early August. These levels show that physical demand has outpaced available supply. Market makers have bid aggressively for remaining inventory, adding upward pressure on prices.
This kind of leasing stress has been rare since the early 2000s, when supply disruptions in South Africa, which produces about 70 percent of the world’s mined platinum, caused similar spikes. While prices have retreated slightly, traders expect tightness to keep the market volatile through the end of the year.
Shifting demand
A significant driver of this year’s surge has been a shift in consumer and investor behavior. High gold prices and declining interest among jewelry buyers in China have redirected demand toward platinum. Jewelers in major Chinese cities report stronger sales volumes for platinum products, supported by its lower price relative to gold and a perception that it remains undervalued.
On the investment side, exchange-traded funds holding physical platinum have seen steady inflows. Investors are positioning for a sustained shortage, boosted by demand from hydrogen fuel cell technology. This outlook is strengthened by the challenge of quickly increasing mine output, given the capital and time required for extraction and refining.
Platinum’s supply challenges stem from both structural and cyclical issues. South African mining operations continue to face labor unrest, power shortages, and operational inefficiencies. Recycling, which provides a substantial share of annual platinum demand, has not expanded meaningfully, partly due to fewer scrap catalytic converters entering the market.
Industry forecasts suggest the market will remain in deficit until at least 2029, even if production improves. New mining projects can take years to develop, and demand from emerging technologies is expected to grow. If these projections hold, any price pullbacks may be temporary.
The outlook for platinum offers both challenges and potential rewards. Risks include slower jewelry sales if prices rise sharply, substitution in industrial uses, and weaker global economic growth that could curb investment appetite. Strategic stockpiling by governments and institutions, however, may sustain high prices over the longer term.
For investors, physical scarcity means that exposure through ETFs, bars, and coins may provide more flexibility than participation in lease markets. Industrial users, particularly in automotive and energy sectors, may need to secure long-term supply contracts to avoid disruptions.
In this environment, platinum’s near-term volatility is balanced by strong long-term fundamentals. The tension between constrained supply and evolving demand will determine whether the 2025 rally is a temporary spike or the start of a multi-year trend.
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