London overtakes Zurich as market for platinum group metals

Thu Mar 28, 2013 9:41am EDT

Related Topics

* More than half of platinum stocks now seen in London

* Swiss platinum, palladium exports to UK jumped last year

By Jan Harvey

LONDON, March 28 (Reuters) - London is overtaking Zurich as Europe's biggest centre of platinum and palladium trading, traders say, less than four years after the 'loco London' market for white metals was launched.

Clearing and settlement of platinum and palladium trades, which had previously been carried out almost entirely in Switzerland, has quietly been gathering pace in London since September 2009.

Since then, platinum and palladium holders have increasingly shifted physical metal from storage vaults in Switzerland to the UK, traders said, with data from the Swiss customs office showing a rise in exports of the metals to Britain in that time.

While no volumes data is published for either Zurich or London, Peter Smith, head of the London Platinum and Palladium Market (LPPM), told Reuters the majority of the market was now trading on a 'loco London' basis.

"Like everything else it took a while to get critical mass, but once the clearing members decided they would make metal available loco London... it became self perpetuating," he said.

"In all probability, the relationship will end up much the same as it is for gold, in that London is the prime centre for physical precious metals," he added.

The greater variety of clearing services - which act as a buffer between buyer and seller - offered by London is particularly appealing to investors after the global financial crisis raised concerns over counterparty risk, traders said.

On a net basis, the amount of raw palladium shipped from Switzerland to Britain more than tripled last year to 33.096 tonnes, according to Swiss customs data, against 9.132 tonnes in 2011. Net raw platinum shipments rose 62 percent to 30.1 tonnes.

EXPORTS TO UK RISE

These were likely to represent transfers of metal from one vault to another, rather than actual underlying demand, traders in the UK and Switzerland said.

Precious metals consultancy GFMS now estimates that more than half of the world's 4.4 million ounces of above-ground platinum stocks are located in the UK.

While the quantity of platinum and palladium shipped from Switzerland to the UK varies widely from month to month, average monthly raw platinum exports have risen to 2,138 kilograms since September 2009 from 547 kilograms over the previous five years.

Average monthly raw palladium exports to the UK have risen to 2,688 kilos from less than 1,200 kilos in the same period. In the first two months of 2013, palladium exports from Switzerland to Britain have already reached nearly half last year's total.

"London is the premier trading centre for gold and silver and it makes sense given the vaulting infrastructure and other factors to make that the case for platinum and palladium as well," an industry source said.

The London market has added vault capacity in recent years. Barclays opened a major new precious metals vault there in September, while Deutsche Bank announced a year ago it would open a new UK vault.

According to traders, vaulting fees for precious metals are sometimes more attractive in the UK than in Switzerland.

"The Swiss banks charge higher fees than those in London," one platinum group metals trader said. "And as London is able to clear platinum group metals now, there is no need anymore to keep everything in Switzerland." (Editing by Veronica Brown and James Jukwey)

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