The Dynamics of the availability of platinum group metals for electronics manufacturers

Platinum group metals (PGMs) are used in the manufacturing of hard disks and capacitors, components that are crucial to electronics. Between March 2007 and March 2008, platinum prices have gone from about $39/g to over $67/g with more than half the increase occurring in the beginning of 2008. Not only has demand outpaced growth in primary capacity, but also, primary producers in South Africa have not been able to operate at full capacity due to country-wide power shortages. The impacts of the power shortages on PGM supply are far-reaching because South Africa produces 77% of global primary platinum and 38% of primary palladium. The high dependence on one country for supplying the world's PGMs is a characteristic of a material with high risk of scarcity. High concentration of supply in one country, one region or one company is a structure-type metric for identifying materials with risk of scarcity through institutional inefficiency. Reclamation-type metrics which also identify institutional inefficiency and Malthusian and Ricardian-type metrics which identify physical constraint were also measured. A firm that identifies its risk for materials scarcity pre hoc can be better prepared for a price spike during periods of scarcity.