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London - Underground vaults next to a Swiss farming village may reveal one reason for the platinum market's indifference to its biggest ever supply shock.
Most analysts and market players expected steep price increases for the precious metal as a record five month mining strike in South Africa, which ended on Tuesday, wiped out about 40% of global supply.
Yet values have been stuck in a $140 an ounce range gaining just 5% so far this year.
High level
Estimates of total platinum stock value vary by billions of dollars, mainly because of uncertainty over how much metal is stored in off-shore vaults.
The Zurich Freilager, or freezone, has been used since the 1920s to store valuables, but very little is known about what goes in and out of the industrial park, advertised by precious metals brokers for the high level of privacy it offers.
Its vaults alone could hold around 20% of the total stocks of platinum in London and Zurich, the world's two main two storage centres for the metal, market players said.
"Miners, refiners, investors, trade houses: they all hold stocks there," a German trader close to the car industry said.
He and other sources in the industry, the main consumer of the metal for catalytic converters, said this was a major reason prices did not shoot up with the strike.
Secretive banks
"Every company knows how much it has but not how much the others have. But users know that there is metal there and therefore there was no panic buying," the trader said.
Storing metal in bonded warehouses is routine practice among purveyors of commodities and the companies involved have not come under the kind of international pressure for more disclosure felt by Switzerland's famously secretive banks.
The Swiss federal department of finance, however, voiced concern over the Freilager system in a consultation paper in 2012 that is expected to lead to some reforms by the end of this year. Among issues it raised was the ease with which the stored goods can be sold in the vaults without tax consequences.
Platinum storage
The Swiss Federal Audit Office in April noted the warehouses' role in easing trade but asked the government to present a more comprehensive plan for them by the end of 2015 "that takes the economic and political stakes into account".
Its report noted issues such as "errors relating to the customs tariff, declaration of origin when declaring goods; inventory irregularities; a lack of traceability of the merchandise and flaws in stock accounting".
Zurich has traditionally been the hub of platinum storage and distribution by traders, bankers and producers, although Singapore, Hong Kong and London have tax free storage areas too.
