JOHANNESBURG (miningweekly.com) – From Monday, September 28, China will give international investors access to trading in palladium and platinum on the Guangzhou Futures Exchange (GFEX), where domestic exchange activity has been improving price discovery since the launch in November last year.

Now, the GFEX’s investment scope is reaching out to foreign institutional investors and giving them full access to platinum and palladium futures and options contracts.

Moreover, the form of the platinum and palladium goes beyond bar and includes sponge amid most industrial and automotive end-users of platinum and palladium requiring it in the form of sponge.

Expected to result from international participation is the elevation of China's role in global platinum and palladium price discovery and the emergence of increased arbitrage opportunity.

GFEX has opted to adhere to the technical specifications, quality standards and responsible platinum and palladium sourcing rules of the London Platinum and Palladium Market (LPPM) and is entering the futures fray alongside the likes of Chicago Mercantile Exchange (CME), London’s LBMA, Japan’s Osaka Exchange as well as over-the-counter (OTC) trading entities.

Asked to comment on GFEX’s advance, World Platinum Investment Council research director Edward Sterck made these points to Mining Weekly. (Also watch attached Creamer Media video.)

“Firstly, given the arbitrage opportunities, this is probably not just going to benefit China's domestic liquidity environment, but also the global liquidity environment, because there will be more trading opportunities for everybody.

“So, you could try to play the arbitrage between the GFEX and the CME, or between London or Zurich OTC and the GFEX, but added to that, China is the biggest consumer of PGMs globally,” Sterck explained.

Because of China’s export restrictions on PGMs and critical minerals in general, and the restrictions on being able to deploy capital overseas, the Chinese end-users have resorted to timing their PGM purchases well.

“When prices have come down, you've seen import volumes into China increase. When prices have gone up, you've seen those import volumes fade away, and that's just because they didn’t really have the ability to manage price risk, so they were very much focused on trying to pick bottoms and load up on their requirements. Then buying would fade away when the price went up.

“I think this changes things in that now China is going to have a much bigger role to play in terms of price setting internationally. They've obviously gained the ability to much more easily manage price risk as well, and so the influence that Chinese end demand, and changes to that, have on the market are going to be much more manifest,” Sterck pointed out.

Mining Weekly: To what extent did the launch of platinum and palladium futures and options contracts on the GFEX in November 2025 increase domestic liquidity and improve price discovery in China itself?

Sterck: It's a bit difficult to give you an absolute quantum in terms of domestic liquidity because we've seen quite a significant shift in terms of how end-users in China are accessing the platinum markets. Previously, around slightly less than 50% of Chinese purchases went through the Shanghai Gold Exchange (SGE). That was a one-way exchange for platinum. You can have two-way trade in other commodities, but effectively for platinum, you can only buy through the SGE, and just before the GFEX launch, there was a change to the VAT rules in China, which removed some exemptions for VAT from platinum, also from gold for certain end uses, and for a number of other things as well. Now that rule change actually was quite punitive to the SGE, so we saw volumes on the SGE drop. We've seen the volumes on the GFEX, which launched soon after that change, increase pretty significantly. But in terms of the overall balance to the market, there's a lot of OTC trading that we can't really track. So, giving you an answer to what's happened to total volumes of trade and liquidity in China is actually quite difficult. What we can say is that the GFEX volumes have been quite substantial. If you measure them against international exchanges, at one point there was a period of sort of initial exuberance, possibly over exuberance, that also coincided with the peak of the precious metals complex in the December/January time period, and at one point the volumes there were rivalling the major international trading locations like London or New York. They've calmed a bit since then and come back down to perhaps what we consider to be normalised levels, but they're still pretty substantial. It's just difficult to give you an overall picture for the country as a whole because a lot of those volumes can't be tracked.

How does one meet the requirements to be eligible under the headings of 'qualified foreign institutional investors' and 'RMB qualified foreign institutional investors’ so that advantage can be taken of the open access to platinum and palladium futures and options contracts?

They've announced that the platinum palladium futures and platinum palladium futures options will be open for international participation from the 28th of September, which is obviously pretty soon. In terms of how foreign investors access or achieve qualified foreign investor (QFI) accreditation, as it's called – so that kind of unifies the two different routes that you’ve just outlined there – it's a bit of a staged process. You need to have a nominated Chinese broker. You then make an application to the securities regulator, and you register with China's foreign exchange regulator as well. There are a couple of other things that go into it, and then the authorities say it'll only take a maximum of five days to process the application. I would imagine that most of the participants who are looking to trade on the GFEX in platinum and palladium probably already have QFI status through maybe activities on the SGE or other exchanges. I would guess that should be transferable across to the GFEX. But it's interesting that it's actually quite a quick process, so that should allow people to engage with the market relatively quickly.

Time wise, will this opportunity have a head start on existing futures opportunities in that it opens earlier and can thus be accessed earlier? 

I think it just creates a more unified sort of global trading environment where you can have something approaching a sort of 24-hour market in platinum and palladium. Don't forget there is already a futures exchange in Japan, which is in a fairly similar time zone. The volumes on the Osaka Securities Exchange haven't been that substantial recently. We've seen a lot of the volume shift to the CME in the US. I guess that for Chinese market participants, that isn't really an option to the same extent that it might be for the Japanese. They don't necessarily have the ability to deploy capital overseas to the same extent. But I think also, from my conversations with potential international participants in various different places around the world, like London or New York, there's quite a high degree of enthusiasm to engage in the GFEX markets and take advantage of any potential arbitrage opportunities that might emerge there. One of the other things to bear in mind that makes the GFEX quite unique versus other exchanges is that the good delivery criteria cover both bar – which is standard globally and they've followed the LPPM criteria and accreditation requirements when it comes to that – but you can also take delivery in sponge and sponge is the form of the metal that most industrial or automotive end-users require, and no other exchange allows delivery in sponge, so it's a fairly unique defining feature. Now, one thing that isn't quite clear to me yet, but I think would be important for international participants, is the GFEX and the SGE and some other Chinese institutions as well, have been talking about giving accredited delivery certifications to market participants that are not located in China. So, effectively, you could take delivery in other countries, which would obviously be easier for a lot of international participants. I don't know if they've actually got as far as doing that yet. So that's something that we should keep an eye on.

Is all access virtual or can in-person contact also be made in this new arrangement?

It's a fully electronic exchange, so I think it's all virtual in inverted commas. There's no sort of open outcry, if that's what you mean. But I guess some people might go in physically to see their broker to lodge a trade, but I'd say there’s probably fairly few people who do that these days.

How active are peer exchanges elsewhere in the world?

I can't remember the exact breakdown by exchange, but if you look at total global liquidity in terms of reported volumes, and this is, for the most part, bar only because the sponge trades that occur are not reported under the LPPM rules, but the total global liquidity for 2025 is about five-million ounces a day. To give you an idea of the quantum of that, the total demand each year is around 7.5-million ounces, so you're having almost a year's worth, or fairly close to a year's worth, of volumes trading every single day that's reported, and there are those unreported volumes as well.

BROADER RANGE OF PLATINUM GROUP METALS

Over time, will the GFEX see merit in embracing other PGMs besides platinum and palladium?

That’s a question that has popped up amid Precious Metals Weekly on September 24 reporting that minor PGMs stood out prominently at this year’s New York Platinum Week.  

“Last year, platinum and palladium stole the show during New York Platinum Week. This year, however, rhodium, ruthenium, and iridium were the stars,” the publication noted.

“Although platinum and palladium were both trading above their levels at the same time last year, with platinum at around $1 780 at the start of the week, up 34% year on year, (y-on-y) and palladium up 8% to $1 297, general sentiment towards this double act was relatively subdued.

“By contrast, there was much greater excitement around the minor PGMs. Rhodium was up 34% y-on-y, iridium reached a record high of $7 850, and ruthenium posted a significant 81% y-on-y increase,” the publication reported.