Hat Tip to Neil Hume (who is FT's commodities analyst) on twitter, who pointed me in the direction of Matthew Turner's blog. Mr Turner is ex Macquarie, and like many good former sell side analysts, has taken up blogging.

http://www.matthewturner.co.uk/wp/2019/10/03/no-evidence-of-substitution-away-from-palladium-indeed-evidence-of-no-substitution/

He has an interesting blog post on North Macedonia and platinum. In 2009 North Macedonia reported imports of unwrought PGMs of only $1, but by 2018 this was over $1bn, with more than 1 Moz of PGMs imported. This year is approaching $1.5bn.

What gives? Is it some dastardly Russian oligarch using Platinum Group Metals to money launder ill gotten gains?

Not quite: In 2010 refiner Johnson Matthey (Johnson Matthey (LON:JMAT)) opened a diesel autocatalyst plant, which was expanded in 2013. This is why North Macedonia’s exports of catalysts also exploded, rising from nothing in 2008/2009 to nearly $2bn in 2018 (Macedonia has not got its own car industry).

The point of Matthew Turner's blog is that there is still no evidence of palladium substitution, hence palladium price should continue to rise, and platinum price weakness remain.

http://www.matthewturner.co.uk/wp/2019/10/18/still-evidence-of-no-palladium-substitution/

To some extent, all the platinum miners also mine palladium (the clue is in the PGM abbreviation: Platinum Group Metals includes palladium, rhodium,osmium, iridium ) so a weak platinum is partially offset by a stronger palladium price . But only partially, the share price performance of the large listed platinum miners shows that their fate is much more dependent on platinum demand than the other metals.

Reminder Sylvania Platinum (LON:SLP) is a low cost PGM tailings miner and the depressed price of platinum hasn't had a noticeable impact on the share price in recent years. It's been almost a 6 bagger for me. I like the asymetry of risk and reward. If the platinum price stays low, Sylvania Platinum (LON:SLP) is one of the lowest cost producers, and should survive. When / if the price of platinum starts to rise, positive effect should drop through to the bottom line of £SLP.

Disclosure: I'm long Sylvania Platinum (LON:SLP)

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