Will the Covid-19 / Coronavirus Affect Platinum, Palladium & Rhodium Prices?

In a nutshell:

  • The economic impact of COVID-19/ coronavirus has yet to put any significant pressure on prices for the platinum group metals
  • But if containment fails and the epidemic becomes a prolonged global pandemic, the economic fallout will lead to palladium prices topping out around current levels with a 10% to 20% fall in the short-term
  • Primary supply deficit and stricter emissions standards in China, India and the EU will limit the scale of price losses for palladium, platinum and rhodium
  • Palladium and rhodium will still be in supply deficit unless demands from the auto-makers fall sharply from a prolonged economic downturn
  • If Palladium prices continue to strengthen, auto makers may substitute the metal with the cheaper platinum, leading to renewed sales from Russian stockpiles to prevent that substitution and causing prices to fall
  • Demand for platinum from auto makers combined with weakness from the Chinese jewellery sector and glass sector may move the metal into surplus in 2020 unless there is upsurge of investor demand
  • Weaker primary supplies and demand from auto-makers due to stricter emission standards will limit the extent of price losses
  • Rhodium is in slight deficit this year and the deficit will continue into 2020 with higher demand from the auto industry and lower primary supply but “based on its previous volatile history, prices eventually could fall hard with the potential fallout from the Covid-19 virus


Given the rapid spread of the Covid-19 virus – previously known as the Coronavirus or Wuhan virus – within the world’s second largest economy, China and to other strategic markets around the world, there’s escalating fear of a broader, deeper and more prolonged impact on global economic growth. It already has a profound influence on market sentiment as bourses around the world took a nose dive and have yet to recover lost grounds. With worries that the Covid-19 virus/ Coronavirus outbreak might filter down to slowing auto sales, the main question on every investor and precious metals recycler’s mind is will the outbreak have an impact on the prices of Platinum Group Metals like Platinum, Palladium and Rhodium too?

Here’s what the analysts are saying:


Amid escalating Covid-19 threat in China – the world’s second largest economy – and

fears of a global economic fallout, Platinum prices have picked up some safe haven support in the past few months but did not see a market rally similar to Gold.

In 2019, the resurgence in physical investment demand for Platinum soared to a record 1.13 million ounces and swung the market into a deficit, reported speciality chemicals company, Johnson Matthey.  This renewed investor’s interest and increased ETF buying has led to a small market rally in spite of a decline in global automotive and industrial demand, in addition to a double-digit contraction in the Chinese platinum jewellery market.


Taking into the consideration of the short-term negative impact due to the virus outbreak, how will the Platinum market fare this year?

For starters, the demand for Platinum will be bolstered by increased PGM loadings in catalytic converters on heavy-duty vehicles in China and India, where stricter emission legislation will be implemented regardless of the outbreak. However, the gain will be offset by further decline in platinum jewellery demand in China and the glass sector.

Johnson Matthey expects the combined demand from the auto, industrial and jewellery sectors not to change much in 2020. In fact, demand is more likely to shrink given that vehicle production volumes and industrial platinum purchases for chemical, glass and petroleum refining plant may take a tumble if the virus outbreak is not contained within the next few months. On a positive note, Alexander Kozul-Wright, commodities economist at Capital Economics believes that stricter emission standards in China and India, coupled with weaker primary supplies will limit the extent of price losses.

However, Kozul-Wright also puts a caveat on his price forecast. The turnaround in global growth once the virus outbreak is contained could “stunt platinum’s safe-haven demand and lower its price”.

Platinum dipped by 4.4% on 29th February to $859.24 per ounce as mounting fear of a global Covid-19 pandemic drove panic-stricken investors to liquidate metal assets to cover losses in other markets. This led to platinum worst weekly fall since 2011. Prices recovered some lost grounds and is trading at $877 on 2nd March.

How long this current level hold remains to be seen. Capital Economics forecasts a fall in platinum prices to $800 by the end of the year, from its height of $980 per ounce.

Johnson Matthey, on the other hand, takes a more cautious approach and refuses to put a figure down. They point out the primary factor that determines the direction of market will be platinum investment demand.



Palladium prices rose spectacularly in 2019 and 2020, surging almost 80% in the six months to a record high of more than US$2,800 an ounce. The average 14% increase in palladium loading in gasoline-powered cars drove its demand to a record high of 9.7 million ounces last year in spite of lower auto production in most regional car markets.

So, will the COVID-19 outbreak put a damper on the market rally?

According to Johnson Matthey, the use of palladium is set to intensify in gasoline cars as auto makers scramble to meet stricter emission legislations in Europe and China by increasing palladium, platinum and rhodium by at least 30% for three-way catalysts in most major vehicle markets, analysts at Morgan Stanley said. This means demand will surge to above 10 million ounces despite slowing global economic growth and falling car sales in key markets including Europe, the United States and China. Hence, prices are likely to remain high as supply will fail to keep up with demand.

Let’s now look at the supply side. Primary supplies from mine production may fall slightly as a result of rationalisation at South African mines and the depletion of palladium-rich surface materials in Russia. However, the high prices of palladium will continue to drive up secondary recoveries from recycling but it is not sufficient to reduce the deficit in any meaningful way.

While a gaping supply deficit will likely underpin prices, analysts are already urging caution on Platinum Group Metals due to short and mid-terms market uncertainties from the rapid spread of COVID-19 from China to the USA and rest of the world. Managing director and head of alternative investments at Direxion, Ed Egilinsky warned the global economic slowdown could lead to short-term negative impact on car sales in 2020.

The price correction came to past on 28 February when Palladium price stumbled more than 10% as news of the rapid spread of COVID-19 to the USA, Europe, Middle East and the rest of Asia crashed bourses worldwide too. Gold prices also took a beating as investors had to cash in on the metal to cover losses in the stock markets, said Michael Matousek, head trader at U.S. Global Investors.

Since then, Gold has regained lost grounds while Palladium is now trading below US$2,500 per ounce, down from US$2,875 in February. The potential fallout from COVID-19 is starting to look like a reality and the exposure of PGMs to the auto sector means prices are vulnerable to auto production disruptions in China and globally. The epidemic and its consequent factory shutdowns have already affected the global supply chain and consequently the auto sector worldwide.

If the virus is not contained over the next few months, the auto industry and market will not be immune to the consequent economic downturn. Given that more than four-fifths of global demand for both rhodium and palladium comes from the automotive industry, the price for these metals will take a tumble in spite of higher PGM loading as car companies cut back on production.

Palladium’s high prices have also raised concerns about substituting platinum for the metal for catalytic converters in motor vehicles. Although the cost benefits for the switch is not yet compelling enough to risk failing regulatory compliance and disrupting production, analysts do not rule the possibility if the gap between platinum and palladium prices continue to widen. In fact, some believe that the substitution may already be in the pipeline and could gradually affect the market from 2021 and would likely substantially affect the market from 2022.

If that happens, Citi analysts believe that the bigger threat to the market is renewed sales from Russian stockpiles, as the country’s leading palladium producer Norilsk floods the market in an effort to prevent that substitution. Norilsk’s Global Palladium Fund, established in 2016, supplied 1m ounces of palladium in 2017 and 2018 respectively, according to Scotiabank, helping to keep a lid on prices.



Spot prices for rhodium have more than doubled from the end of last year to trade at an average of  $12,218 an ounce, according to data from specialty-chemicals company Johnson Matthey.

Rhodium moved into a slight deficit in 2019, as a modest increase in combined supplies was not enough to meet a 10% rise in total global demand of which a 15% increase came from the auto makers, following a step-change in PGM loadings for vehicles in the Chinese market. Auto makers in other regions also used more rhodium to meet tighter emissions standards and more stringent testing, says Johnson Matthey.

As a by-product of platinum with no known natural substitute, rhodium prices benefit from supply deficit as a result of the decline in platinum production due to a combination of prolonged weakness in platinum prices, higher output production costs and a less liquid trading market.

Given the tightening of emission standards in China, India and the EU, stronger gains are expected in auto-catalyst demand. The COVID-19 epidemic is unlikely to have a significant price impact given the current supply glut and future demand.

Hence, the outlook for 2020 is a deepening market deficit with further strong gains expected from the auto makers, albeit at a slower rate than last year.