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Platinum and palladium futures commenced trading in China today, marking the country’s first step toward establishing a domestic tool to hedge against price volatility while reducing dependence on imports. Following approval from the securities regulatory authority, three futures contracts each for platinum and palladium were listed on the Guangzhou Futures Exchange. The benchmark price for platinum was set at CNY405 (USD57.20) per gram, and for palladium, CNY365 per gram. Trading options will begin tomorrow.
These metals are crucial raw materials in green industries, utilized in vehicle emissions control systems, wind power, and hydrogen energy. In China, approximately 60% of platinum and nearly 80% of palladium are used in environmentally friendly applications.
Despite being the world’s leading consumer of platinum group metals, China relies heavily on imports, making domestic companies vulnerable to global price fluctuations and supply chain uncertainties. Last year, the country imported 91.1 tons of these metals—71% of its total supply—valued at CNY22.6 billion for platinum (81.7 tons) and CNY1.91 billion for palladium (9.3 tons).
“Platinum prices surged sharply this year after a three-year shortage, increasing costs and creating price risks for Chinese firms,” explained Deng Weibin, managing director at the World Platinum Investment Council in the Asia-Pacific region. “This underscores the significance of launching platinum and palladium futures.”
Futures and options denominated in yuan will significantly aid new energy companies in managing risk, Deng highlighted. They eliminate currency exchange risks and offer delivery terms better aligned with domestic industrial requirements, enhancing hedging effectiveness. Additionally, options provide more flexibility, enabling firms to limit potential losses while maintaining upside potential.
Over the past five years, the annual price volatility of platinum and palladium has exceeded 20%, according to Li Jun, a researcher at Guangzhou Financial Holdings Futures. This high variability will drive businesses to adopt derivatives to manage price risks effectively. Looking ahead, products from leading suppliers like South Africa and Russia may enter China’s market directly and be traded using yuan-based delivery contracts.
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