Investors pile into platinum funds in bet on hybrid vehicles...

Investors pile into platinum funds in bet on hybrid vehicles

Highest ETF inflows in four years come as electric car sales flag


Investors are betting on resurgent interest in hybrid vehicles and resilient demand for traditional combustion engines cars by pouring cash into funds that invest in platinum at the fastest rate in four years. Holdings of exchange traded funds backed by physical platinum surged by about 444,000 ounces in the second quarter, equating to almost 6 per cent of annual demand and the biggest jump since 2020. Both hybrid and traditional engine vehicles use platinum to reduce harmful emissions. Sales of hybrid vehicles have surged — with major carmakers investing heavily in this area again — as consumers grow wary of fully electric vehicles, while combustion engine vehicles are now predicted to be around for longer than previously thought.

“The investor interest is coming from slower battery electric vehicle growth and the higher for longer combustion engine vehicle demand,” said Edward Sterck, director of research at the World Platinum Investment Council, an industry lobby group. He added that “hydrogen is a nice-to-have future story for platinum.” The ETF inflows helped to propel the platinum price 20 per cent higher over a month to the middle of May, after mostly trading below $1,000 per ounce since last June. The metal has since retraced some of its gains to trade at $1,014 per ounce, less than half of its all-time high of $2,240 in 2008. Analysts said some investors were taking their profits from a rally in gold, which hit an all-time high of around $2,450 per troy ounce in May, and reinvesting them into other precious metals such as silver and platinum. “It’s all about the fact that we have had a strong precious metals rally in gold and silver and an expectation that platinum would be the next in the group to gain,” said Nitesh Shah, head of commodities research at WisdomTree, which offers a platinum ETF.

ETFs linked to palladium, another metal used in catalytic converters, have seen strong inflows equating to 200,000 ounces this year. Global carmakers including Ford and Stellantis are expanding their line-up of gas-electric hybrids as sales growth of electric vehicles slows owing to concerns about cost and charging infrastructure. Investments in hybrid technology are far smaller than electric vehicles while carmakers are able to generate higher profit margins.

Toyota has also churned out record profits on the back of booming hybrid sales and recently unveiled a new generation of internal combustion engines as it expects the global shift to electric vehicles to take longer than expected. Against this backdrop, hybrid vehicle sales in Europe this year have climbed 21 per cent to 1.3mn units, compared with growth of just 2 per cent for EVs, according to BNP Paribas. US hybrid sales have risen even faster at 35 per cent year on year. “Manufacturers who had decided to stop producing hybrids are adding them back to their catalogue. Everything has shifted from around a year ago,” said Philippe Houchois, an analyst at Jefferies. He added that even though the sales data on “the revival of hybrids” is mixed, especially in Europe, carmakers have heavily started to reinvest in the technology. “It is hybrids for longer, plug-ins for longer,” he said. “They will all need catalytic converters.”

Catalytic converters in hybrid vehicles require higher volumes of platinum and palladium than traditional petrol and diesel engines. By contrast, the slowdown in EV demand has hit the prices of metals used in batteries such as lithium, cobalt and nickel. Nicky Shiels, an analyst at MKS Pamp, a Swiss precious metals refinery and trader, said that the EV slowdown was “an absolute tailwind” for investment demand for platinum. Shiels added that investor attention had been further boosted by mining company BHP’s abortive bid for rival Anglo American earlier this year. As part of its offer, BHP had demanded that Anglo exit its platinum business, the world’s largest producer, adding risk for investors who tried to gain exposure to platinum by investing in the mining equity. Paul Syms, head of commodities product management at Invesco, said that platinum demand was also boosted by AI and data storage since the metal is used in hard disc drives, while supply is expected to be low.