Platinum Demand for Hydrogen Vehicles Could Drive ETFs

Platinum Demand for Hydrogen Vehicles Could Drive ETFs

The price of the rare metal spiked in April.

Reviewed by: Lisa Barr
Edited by: Sean Allocca

Platinum-focused exchange-traded funds may make headlines over the next few months as power issues in South Africa crimp global supply, and interest in hydrogen vehicles boosts demand for the rare metal.  

Eskom Holdings is responsible for 95% of all electricity in South Africa, but decades of underinvestment and mismanagement have left it in tough shape with chronic outages.  

In late April, Eskom was forced to institute Stage 8 load shedding for the first time in its history. “Load shedding” is the switching off of parts of the electric grid in a planned and controlled manner due to insufficient capacity in order to avoid a countrywide blackout.  

If that wasn’t enough, labor strife is heating up. On April 21, unions rejected management’s 3.75% pay increase offer, saying it is too far below the current rate of inflation, demanding instead a 15% increase in wages.  

Mining is responsible for 32% of electrical use in the country, and though it is highly profitable for the country, it is butting up against the limits of the existing grid.  

According to Bank of America, platinum is expected to rise to $1,500 an ounce by year-end—up 38% from its present price of $1,087—citing the rolling blackout situation as a likely hit to South African production. 

In contrast to supply constraints, platinum demand is expanding. Due to its unique physical properties, platinum is being used more in biomedical research, chemical processing, specialty electronics and specialty manufacturing—not just jewelry and catalytic converters. A major new source of demand is emerging from a rather unexpected place: the hydrogen industry.  

Hydrogen Demand 

Platinum catalysts are deployed in two key applications—electrolysers and hydrogen (H2) fuel cells—which feed into power generation and the fuel cell electric vehicle market.   

The metal is at the core of most proton exchange membrane applications—specifically used for splitting water into hydrogen and oxygen—as the metal provides a highly reactive surface area that can withstand corrosive conditions. The PEM is coated with platinum at the cathode in order to strip the hydrogen of electrons to produce electricity.  

Depending on the size of the engine, there are between 30-60 grams of platinum in each fuel cell needed to power a hydrogen vehicle, whereas a gasoline engine catalytic convertor would only use about 5 grams. 

In fact, the World Platinum Investment Council sees the hydrogen industry as possibly the largest platinum demand segment by 2040, especially as hydrogen is expected to replace diesel in heavy transport in the U.S. and in Europe.  

Pure-Play ETFs 

There are three pure-play platinum ETFs available in the U.S. market: the abrdn Physical Platinum Shares ETF (PPLT), the GraniteShares Platinum Trust (PLTM) and the iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM).  

Platinum ETFs Comparison


None of the ETFs hold shares of platinum mining companies, but rather the metal itself via physical possession or contracts.  

PPLT is the proverbial veteran, having launched back in 2010. It has assets under management of $939.18 million and offers the highest daily volume and tightest spread of all three ETFs.  

It prices platinum off the London Bullion Market Authority spot price and is a grantor trust, which means the fund holds physical metal in its vaults in Zurich and London and then administers the buying, stocking and sale of that supply on behalf of the trust’s owners. The fund has an expense ratio of 0.60%. 

PLTM is also legally structured as a grantor trust, with physical platinum held in a London vault that is inspected twice a year. It’s not allowed to hold derivatives. Its expense ratio is slightly lower than PPLT’s, at 0.50%, and has been operating since January 2018, with significantly lower trading volume.  

Unlike the other two ETFs, PGM is structured as an exchange-traded note. As is the case with most ETNs, it invests in futures contracts that track the price of the underlying, as opposed to holding it in physical form.  

PGM tracks Bloomberg’s Platinum Subindex, with its segment benchmark being the LBMA platinum spot price. Though it has the lowest expense ratio, at 0.45%, PGM has a very low, rather illiquid, daily volume. It has performed better than its two competitors in a one-year comparison.  




Interesting Setup 

There are now 300 green hydrogen projects under construction worldwide. This fall, seven to 10 public/private hydrogen hubs in various regional locations are set to be chosen by the Department of Energy and given a total of $8.5 billion in subsidies in 2024. Expect this to bid up platinum demand in a new structural way. 

In contrast, South Africa’s electrical grid appears to be heading into another period of crisis. Eskom is facing strikes or much higher labor costs. Last week, Eskom’s former head, Andre de Ruyter, told the government in an affidavit that, in his estimation, the company loses $54 million per month to corruption.    

Two days ago, South Africa’s president ordered 880 army personnel to be stationed at power stations to reduce theft and sabotage at the state-owned utility.  

Hopefully this scrutiny will keep operations limping through the months of June, July and August. Winter is coming in the southern hemisphere and those are the months of peak electrical use.  

Despite a recent peak on April 21, platinum has seen a vigorous bounce since May 4. More importantly, it has just the kind of supply/demand setup that typically drives a long-term rally.   


Sean Daly writes on ETFs, biotech and wealth management. He was educated at Columbia University and has taught international finance, computing and financial risk management at Pace, Tulane and Princeton. Follow him on Twitter (X) via @Sean_Daly_.