Platinum prices soar amid supply deficit and AI demand
Platinum group metals saw significant price gains over the course of 2025, after tightening physical supplies and increasing retail and institutional investor interest hiked costs.
Platinum’s average price rocketed 33 per cent last year, hitting $1,280 (£985.5) per ounce, up from $960 the prior year, according to the latest report from Metals Focus.
The price of the precious metal spiked significantly toward the end of the year, reaching $2,491 per ounce, with the report crediting the jump in value to the persistent deficit of platinum and ongoing geopolitical tensions, which caused investors to flock to metals.
2025 marked the third year of a consecutive deficit, with supply falling four percent year on year to 5.6m ounces.
Wilma Swarts, head of platinum group metals (PGMs) at Metals Focus, said: “There are multiple reasons for this investment demand interest, but it does have a geopolitical, macro kind of driver behind it, with the gold price having soared to all exorbitant heights.
“Hard assets have become key and platinum and even some of the more exotic precious metals are…getting to be interesting from an investor’s perspective.”
Automotive losses and AI boom
The use of PGMs, which includes rhodium and palladium alongside platinum, in the automotive sector remained resilient but entered a phase of structural decline, reflecting the industry wide shift to electrification.
Global vehicle production rose in 2025, defying supply chain issues caused by US tariffs, but PGM demand fell two per cent to 11.9 moz, marking the first time it has dropped below 12 moz since 2022.
This was driven by a fall in light diesel vehicle share, which platinum is used for, in favour of battery electric vehicles.
Swarts said: “Electrification is happening, but where it’s landing is not entirely a disaster for PGMs. It is a slow transition.”
While PGM use is dwindling in automotives, it is gathering speed amid the AI sector, with the metal crucial for the “hyperscale” of data centres and creation of large language models.
Platinum demand jumped six per cent, triggered by its use in manufacturing advanced chips, while demand for ruthenium increased 11 per cent, off the back of its use in data centre manufacturing, with Swarts noting “full order books”.
Mining woes
Despite the increased use in AI and electronics, PGM supply is dwindling, with 2026 marking its fourth year of deficit, following a decade of under investment in mining.
However Swarts noted that the price of PGMs has been too depressed to incentive mines to invest in new mining projects.
In the mining sector, investment decisions primarily depend on the price of metal, with a number of new copper and gold projects being announced by companies including Fresnillo, to capitalise on its glittering bull run.
She added that it takes roughly seven years to reach steady state production to get the greenlight for a new mine, meaning palladium’s recent price rally is not yet sufficient to trigger fresh projects.
She said: “If you are a chief executive of a mining company, you’re facing a declining market, and you, you know, and you have a very, very decreased basket price… you’re focusing on sustaining capital and your cash cost management rather than development capital.”
2026 outlook
PGM prices are anticipated to see significant year on year growth in 2026, averaging $2,190, while palladium will reach $1,570, with all remaining in deficit.
Mine supply will also continue to be tight, with PGM supply projected to fall 2.2 per cent year on year to 13.9 moz, despite modest production gains in South Africa, as this will be offset by falling ore grades in Russia and Canada.
The ongoing conflict in Iran is also placing pressure on PGMs, with the closure causing a rise in energy costs, which indirectly inflates mining costs.