Inflation law tax credits to brighten platinum prices
The Inflation Reduction Act offers a $40,000 credit for clean commercial vehicles and $4,000 for used cars
Peapack Private Wealth Management managing principal cautions investors to not overreact to July's inflation rate on 'Making Money.'
The Inflation Reduction Act (IRA) should lift prices of platinum, a key component of many green technologies, by expanding tax credits to stimulate demand for hybrid and electric vehicles, charging and refueling stations, green energy storage and other clean energy investments.
"The Inflation Reduction Act is expected to increase demand for platinum and platinum group metals in the near-, medium- and long-term," Trevor Raymond, director of research at the World Platinum Investment Council, told FOX Business.
Platinum and palladium, along with rhodium, iridium, ruthenium and osmium, make up the platinum group metals.
Platinum is used in jewelry, but the precious metal has industrial and automotive applications. Demand is heavily influenced by the auto industry, where platinum, palladium and rhodium are used in parts, including catalytic converters. Platinum and palladium are often swapped in the manufacture of converters, depending on the price of each metal.
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IRS 1040 Individual Income Tax forms for the 2018 tax year are arranged for a photograph in Tiskilwa, Ill., March 11, 2019. (Daniel Acker/Bloomberg via Getty Images / Getty Images)
If the IRA raises demand for alternative fuel vehicles, it would be a plus for platinum and palladium. Converters in hybrid vehicles contain more of those elements than gasoline-powered vehicles. For example, the dual exhaust Toyota Prius has two converters.
Tax credits for clean vehicles
The IRA provides tax credits of:
– $40,000 for purchase of a clean commercial vehicle weighing 14,000 pounds or more, with lighter vehicles qualifying for a $7,500 credit
– $7,500 for purchase of a new clean vehicle costing $55,000 or less ($80,000 for SUVs, pickups and vans)
– 30% or $4,000 for the purchase of previously owned plug-in electric and fuel cell vehicles by customers with incomes up to $150,000 if married, $112,500 if head of household or $75,000 if single.
Help for green hydrogen
An employee moves a completed automobile catalytic converter emission control device at BM Catalysts in Mansfield, U.K., Sept. 30, 2015. (Chris Ratcliffe/Bloomberg via Getty Images / Getty Images)
The bill includes incentives to promote green hydrogen, another technology that relies on platinum. Platinum serves as a catalyst for the production of green hydrogen used in fuel cell electric vehicles and stand-by or remote power supplies. Green hydrogen is produced when electricity is generated from the sun, wind, water or other renewable resources.
"We believe that the Inflation Reduction Act will result in greatly increased funding of decarbonization and, in particular, the generation and use of green hydrogen to significantly reduce carbon emissions and the reliance on fossil fuels," Raymond said.
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The green hydrogen inducements include:
– A $3 per kilogram credit for producers of clean hydrogen, which would effectively make green hydrogen the cheapest in the world, according to some sources
– An extension and expansion of the tax credit for alternative fuel refueling property, such as electric charging stations or hydrogen fuel cell recharging stations, with a new credit limit of $100,000
– A new credit for energy storage, including hydrogen storage.
"We believe this provides strong support for fuel cell electric vehicle and hydrogen refueling infrastructure growth," Raymond said.
Tesla cars charge at a Supercharger station on Culver Avenue in Irvine, Calif., Jan. 28, 2022. (Paul Bersebach/MediaNews Group/Orange County Register via Getty Images / Getty Images)
"We believe that the Inflation Reduction Act will result in greatly increased funding of decarbonization and, in particular, the generation and use of green hydrogen …"
Platinum supply and demand are both expected to fall this year and grow in 2023 as the auto industry continues to untangle supply chain issues, according to estimates released last week by Russian metals miner Nornickel. The outlook through 2030 is for a deficit.
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Current platinum prices have changed little from January, though they spiked briefly on supply fears when Russia invaded Ukraine Feb. 24.
Platinum started 2022 at $954 per ounce and peaked on March 8 at $1,153, a 21% gain, according to data from Macrotrends. Since then, prices have fallen but have been on the upswing since mid-July as passage of the inflation bill heated up.