What is unfolding in the platinum group metal markets is a perfect storm, a vicious circle of conditions that will lead to exploding prices.
As the world ultimately realizes how small these markets are, panicked users will buy and investors will be a huge force and source of demand.
Unfortunately there is no real answer since there are no significant inventories above ground; the metal is extremely rare below ground; and the ability to increase production takes years and is small in the context of the demand that I see unfolding.
This is much less of an issue when substitutions are available or when the product in question is not critical. But in this case of the platinum group metals there are no substitutions outside the group, and the use cases are absolutely critical and essential to the functioning of modern society.
On top of all of this the disaster which is ESKOM is unfolding; decades of mismanagement, corruption, and poor maintenance and planning which has left the South African electricity grid deeply vulnerable.
For a society still working to get its footing, electricity disruptions could become a significant human tragedy as a result of not only limited access to electricity but loss of jobs in an already troubled economy.
It all adds up to a perfect storm, a vicious circle.
There is always another side to challenges and what is a vicious circle for users and potentially the South African economy and population is a virtuous circle for investors given the explosion in prices I anticipate in the platinum group metals and for different reasons in gold.
Let’s hope though that there is some way of solving the ESKOM crisis to avoid the human exposure and terrible challenges brought on by an electricity grid that is on the brink of further dysfunction.
I believe precious metals prices are going inexorably higher whatever happens to ESKOM. But a working resolution to the ESKOM problem will be an extraordinary opportunity for South Africa to benefit from dramatically higher prices in the precious metals without the human hardship.