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Given an asteroid mining company manages to deliver platinum (ore) to Earth, how would they need to set their selling price to account for delivery, given that today on Earth 1g platinum costs $30 to buy?

Case 1: they have access to large amounts of platinum alloy comparable to what the current industry processes

Case 2: they have access to large amounts of (more or less) pure platinum

Also, what is the maximum amount of platinum they can safely supply per annum without a too negative impact on economics?

(inspired by The Garin Death Ray where Garin's enterprise floods the world with unlimited free gold to crash the markets)

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    $\begingroup$ Hint: nobody mines for platinum. All the commercially available platinum is obtained as a by-product from the refinement of copper and nickel. It's just a not very useful material; the entire amount of platinum bought and sold each year is a few hundred tonnes. (Compare with gold, which is much more expensive and yet the annual production is 15 times bigger.) Moreover, the main application is catalytic converters for ICE emissions control; once upon a time there was an increase in the demand of platinum for those, but nowadays most platinum for this application comes from recycling. $\endgroup$
    – AlexP
    Commented Feb 21, 2019 at 9:15
  • $\begingroup$ so this is actually a great insight the the world does not need at all that much platinum :-) $\endgroup$
    – J. Doe
    Commented Feb 21, 2019 at 9:22
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    $\begingroup$ @alex there are several platinum mines, platinum is one of the few metals that occurs in its native state. Platinum has many uses both as corrosion resistance, biocompatibility, electrical properties, and as a catalyst for certain reactions, (silicon rubber requires platinum catalysts to make for instance), price is a major limiting factor in its usage. Not much is traded becasue there is not much to go around. Saying platinum is not useful becasue not much is made is like saying aluminum has no use because not much was minied prior to the 1960's $\endgroup$
    – John
    Commented Feb 21, 2019 at 14:36
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    $\begingroup$ @AlexP And platinum produces about 200 tons whats your point? their industrial uses are not interchangeable. $\endgroup$
    – John
    Commented Feb 21, 2019 at 15:17
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    $\begingroup$ @AlexP historically, platinum was more expensive than gold. Gold price overtaking platinum is a phenomenon only of few recent years. Maybe some asteroid mining company has started to sell it? :) $\endgroup$
    – Alexander
    Commented Feb 21, 2019 at 18:44

3 Answers 3

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how would they need to assume their selling price to plan the amount of delivery per mission given that today on Earth 1g platinum cost $30 to buy?

You are probably misunderstanding the economic theories. In a free market the price of any good or service is determined by meeting the offer and the request.

If, as you state, the current price of platinum is 30 dollars/g, then your mining company has to be able earn a profit with that price. This means that all the costs involved with extracting that platinum and carrying it to Earth, plus the profit they want to make, have to be 30 dollars/g. If they sell it at a higher price, nobody will buy it. If they sell it at a lower price, they are losing money since buyers are willing to pay more for what they are selling.

I have sketched some calculation on this other answer of mine, about landing an asteroid for mining.

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  • $\begingroup$ okay maybe my assumption is wrong so far I thought that if they offer exactly 30 dollars/g not everything would be sold especially if they deliver large amounts, therefore the selling price should be a bit lower. Also, you do not address the aspect about the cap. Also in your example a 20m radius planitum sphere would weigh above one mega-ton? LOL that could indeed crash the market. $\endgroup$
    – J. Doe
    Commented Feb 21, 2019 at 8:11
  • $\begingroup$ @J.Doe, I am not sure that the present cost structure of space travel would make any space mining profitable. Let alone oversupplying. $\endgroup$
    – L.Dutch
    Commented Feb 21, 2019 at 8:16
  • $\begingroup$ That is, I strive to understand what would assume the changes in the cost structure towards profitability. $\endgroup$
    – J. Doe
    Commented Feb 21, 2019 at 8:35
  • $\begingroup$ This is a really simplified view of market dynamics, this is not a minor seller this is a seller who has the option of monopolising the market. more over the profit they want to make is not a set thing, it is entirely possible to make more profit by selling more product at a lower cost. $\endgroup$
    – John
    Commented Feb 21, 2019 at 15:14
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With the information give it can't really be answered, not with numbers.

They have two option basically they can to undercut the other producers or produce so little they don't have a major impact on the market. In hte latter they have to follow the debeers example and stockpile the material and sell it slowly. Basically mining becomes a long term investment for them. This however has its flaws, the first option has less risk of loss so they will likely favor that one, predicting market trends out centuries to too flawed to rely upon. This is what real world companies do when they discover large deposits of valuable materials, produce at the lowest cost and sell at the best price they can, this causes prices to drop, if other sellers can't keep up with the lowered price they fail. Many companies achieved monopolies using this method.

How much they can afford to let the price of platinum fall is going to be based on two things, how much it costs for them to mine (which we don't know) and how much demand will rise as prices fall (which we also don't know) Platinum has a plethora of uses and demand may rise quite quickly as prices fall.

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Three ways to predict the future price:

  1. For materials with easily-predictable supply and demand, hire an economist to measure the supply curve and demand curves at current levels. Also look at the likelihood of exhaustion of existing sources, development of alternate sources, and potential substitution by consumers. Platinum, as a material of mostly industrial uses, falls into this category.

  2. For materials with fluctuating supply and demand, use the existing commodities futures market to keep your price predictable and to shift risk to the speculators.

  3. For materials with limited supply, create a cartel or monopoly. Acquire or eliminate the terrestrial suppliers, so you can charge whatever you wish. That might be the most fun story - lots of intrigue and action, very few dull economics lectures.

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  • $\begingroup$ "hire an economist to measure the supply curve and demand curves at current levels" - That was very nearly a milk-on-the-keyboard moment. First, such "measurements" vary with time, and the point of the exercise is to project the viability of the project over its lifetime. Second, regardless of "normal" or "current" market behavior, the knowledge that a major new source is coming into the market will grossly change the market, so "current levels" will no longer apply. $\endgroup$ Commented Feb 21, 2019 at 17:46
  • $\begingroup$ @WhatRoughBeast glad you managed to hold it in. The OP needs a starting point with real data (current) if it's a real problem. "Grossly change the market" is why supply and demand are both curved and elastic...and how to measure them is long established practice in economics. Grossly changing the supply may not fundamentally change the market at all, and that's what the OP seems to assume. $\endgroup$
    – user535733
    Commented Feb 21, 2019 at 18:55

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