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Prospects for platinum in geopolitics

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Both production and demand for platinum were under pressure in the first half of this year. Supply has been hit by disruptions in South Africa, where major producers have adjusted production targets amid bad weather and drawdown of work-in-progress inventories accumulated during the pandemic. Demand was affected by the Ukrainian conflict that exacerbated the situation in the automotive industry where recovery was already delayed due to the ongoing semiconductor scarcity. The price reached a 9-month high of $1,180 per ounce because of concerns about the availability of metal from Russia (which provides 10% of the global platinum and 40% of the global palladium production), but it corrected by almost 30% by September.

At the same time, long-term forecasts of producers assume a rapid reduction in the platinum supply with almost excellent demand for it. The development of the hydrogen economy accelerated by the EU’s desire to reduce its dependence on the Russian gas, and its high prices are expected to be an important driver for this.


In 2022, the platinum market will see a surplus of 900 thousand ounces, which is a little lower than in 2021 (about 1 mn ounces), according to Norilsk Nickel. According to the company’s experts, the automotive sector will recover in H2 2022, while the demand for jewellery is under threat due to the risk of an upcoming recession in developed countries. The surplus may be partly absorbed by investment demand.

Demand for the metal (excluding investments) in 2022, according to Norilsk Nickel forecasts, will decrease by 4% to 6.9 mn ounces, while the global production of primary platinum will decrease by 5% to 6.2 mn ounces, and supply in the secondary market will reduced by 6% to 1.6 mn ounces.

In 2023, the platinum market surplus will decline to 600,000 ounces as the recovery in auto demand will continue and supply growth will slow, Nornickel believes.

The World Platinum Investment Council (WPIC) estimates a surplus of 627 koz in 2022, 44% below the 2021 levels. Aggregate primary and secondary supplies are expected to decline by 5% to 7.78 mn oz, while demand will rise by 2% to 7.155 mn oz.

The supply chain problems will cut demand for platinum used in the auto production by 271,000 ounces, according to WPIC. This organization acknowledges the risks of a slowdown in economic growth for the platinum demand but believes that these risks will be offset by the pent-up demand for newly launched motor vehicles and higher use of platinum in autocatalysts in China where these rates are already close to the European and North American levels. China imported more metal than it used in 2020 and 2021, with China’s excess imports last year sufficient to fully absorb a surplus of 1.2 mn ounces, WPIC says. As a result, the WPIC does not rule out a significant reduction in the surplus or even no surplus this year and an increase in the deficit in 2023 to 2026.

Anglo American Platinum (Amplats) believes that the platinum market surplus will decline to around 300 koz in 2022 and predicts a tight supply in the platinum market from 2023 due to the hydrogen economy development, the elimination of the semiconductor shortage and the replacement of palladium. Shortage will reach 300 koz ounces in 2023 to 2025, Amplats believes.


(Source - Amplats annual results presentation 2021)


The decline in the demand for platinum this year is primarily due to the decline in the global auto production, Norilsk Nickel notes; a partial recovery in the global auto market will be negatively affected by a decrease in consumption in China.

Global passenger car sales decreased by 9% in H1 2022. Europe, which accounts for a third of global demand for platinum for automotive sector, was hardest hit by the Ukraine crisis in terms of disruptions in the auto parts supply chain. The conflict in Ukraine resulted in a reduction in the harness and neon production, which in turn led to a decrease in the number of auto sales in the EU by almost 20%. Also, a reduction in the share of new cars with a diesel engine in the EU creates an additional pressure on demand. China has faced severe restrictions due to coronavirus lockdowns that have nearly paralyzed local auto production for about two months.

In addition, Norilsk Nickel draws attention that in China, the use of metal in the auto production in 2022 will not grow, as WPIC believes, but it will decrease. This is explained by the fact that manufacturers will optimize loadings after strong growth last year due to the introduction of China VI emission regulations that resulted in an increase in the amount of platinum used in truck production.

And, finally, the unsolved challenge of the semiconductor shortage impacts the auto production, and this year, the motor vehicle shortage is estimated at over 2 mn vehicles, Norilsk Nickel concludes.

The chip shortage will continue to affect the auto production sector until H2 2023, although next year, the effect will be negligible and will not prevent the auto production industry from exceeding the pre-Covid level of 2019, Amplats expects.


WPIC expects auto demand to rise by 16% (or by 412 koz) this year as semiconductor supply problems will be offset by higher metal loading requirements in autocatalysts and increased replacement of palladium with platinum.


According to the WPIC forecasts, the industrial demand for platinum will fall this year by about the same amount as the demand in the automotive industry will rise (by 16% or 399 koz) mainly due to a reduction in commissioning new optics capacity compared to the record 2021 (in this regard).

Demand in the jewellery industry will decline by 2% YOY as China’s strong measures aimed at preventing the COVID-19 spread slow down the jewellery trade, offsetting a more upbeat situation in other important regions, according to WPIC.

Norilsk Nickel also expects an annual drop in demand in production sectors, including a jewellery industry.

In Q1, the demand for platinum in the jewellery sector fell by 9%, and it collapsed by 25% in the production sector.


The expected structure of the car market in the long term creates a very comfortable environment for platinum, WPIC believes. Internal combustion engine (ICE) vehicles, including hybrids, plug-in hybrid electric vehicles (PHEV) and mild hybrid electric vehicles (MHEV) will dominate until the 2030s, which is promising for platinum given higher PGM loading requirements due to tougher environmental regulations and replacement of palladium in gasoline vehicles. By 2028, the ICE-related demand for platinum is expected to peak, then gradually decline. But after that, the demand for platinum will be stimulated by higher production of FCEVs (fuel cell electric vehicles), as the metal will be in demand again for their production. As a result, at least until the 2040s, the demand for platinum in the auto industry will be at historical levels, concludes WPIC.


(Source – WPIC Platinum Essentials June 2022)

Another factor is the geopolitical crisis this year. The situation contributes to the development of infrastructure for hydrogen fuel cells, since the strategy adopted by the European Commission to reduce the Europe’s dependence on the Russian gas (that satisfied 40% of the EU’s needs), involves the replacement of a significant part of the supply with environmentally friendly hydrogen. High gas prices will further accelerate this process, according to WPIC.

Metals such as platinum and rhodium are needed for a growing hydrogen economy, so the medium and long-term demand for them is not under threat, Northham notes. Northham also supports the thesis that, despite electrification, ICE and hybrid vehicles will dominate the passenger car segment over the next two decades, with emissions regulations continuing to tighten. “Internal combustion engines in one form or another will be around across the world for many decades to come,” says CEO Paul Dunne. Norilsk Nickel shares the same opinion.


In the first quarter of this year, global primary refined platinum production (1.695 mn ounces) was 13% below a year ago and fell below initial expectations for half a year as South African miners experienced production disruptions.

Major producers like Amplats, Impala Platinum and Northham Platinum have cut their output targets this year by almost 490 koz collectively. Amplats revised its forecasts due to delays in production at the Mogalakwena field (the world’s largest platinum quarry) due to heavy rains at the beginning of the year. Impala closed one of its Rustenburg furnaces for maintenance for four months, which will reduce the platinum output by approximately 140 koz in H1 2022. In addition, the Stillwater mine was closed in mid-June as floods damaged roads and bridges in the area close to Sibanye mining assets.

Norilsk Nickel expects the global primary platinum production to decline by 5% to 6.2 mn oz, given the risk of a decline in South African platinum production associated with potential power outages and strikes at the Sibanye operations. The company estimates that supplies on the secondary market will fall by 6% to 1.6 mn ounces amid the reduced availability of jewellery scrap in China.

WPIC expects the platinum production to decrease by 7% (to 5.87 mn ounces) and production on the secondary market to decline by 2% (to 1.91 mn ounces). In Q1, recycling sank by 20% YOY as automobile owners preferred to use their vehicles longer amid a slowdown in the new auto production.

Amid more than a decade of underinvestment in the mining industry, platinum and rhodium primary supply will see a decline by 2030, while palladium supply will remain at the same level, Northam notes after analyzing global resources and PGM reserves. “There is a systematic global primary supply problem and the scarcity of both new PGM resources and new mining projects will bite hard,” says CEO Paul Dunne.


(Source – Northam results presentation 2022)


The price of platinum reached its local high on March 8 at $1,150 an ounce as a response to concerns about supplies from Russia, but as these concerns subsided, the price of platinum returned to a yearly low of about $840 an ounce by the end of August.

Analysts and traders surveyed by Reuters in early August sharply decreased their platinum price forecasts due to their concerns about the impact of the global economic slowdown on demand. The median forecasts from a survey of 27 analysts and traders’ platinum forecasts dropped to $914/oz in Q4 and $1,013 in 2023. Three months ago, the same experts’ forecast was $1,170/oz for next year.

“Sustained weakness in the auto sector is weighing on platinum autocatalyst demand (and) jewellery demand is suffering,” said analysts at ANZ Bank.

Four experts believe that platinum supply will be excessive this year, but the surplus will shrink in 2023; one expert predicted a deficit in 2023.


Replacing palladium with platinum in the catalysts of new gasoline-powered cars is an important driver of growth in demand for platinum in the medium term. This process is stimulated both by the difference in the cost of metals having similar properties, and by the intention of many Western companies to reduce their dependence on the Russian palladium, WPIC points out.

This process could increase demand for platinum for the auto production by 340,000 ounces this year, according to WPIC. In July, the estimate was increased up to 512-853 koz. WPIC recalls the tri-metal catalyst project being implemented by BASF with Impala Platinum and Sibanye-Stillwater. Other catalyst manufacturers may also join the project. Based on conservative substitution levels, WPIC forecasts platinum demand caused by the replacement of palladium to increase to 739 koz by 2024, and to 960 koz by 2026.

WPIC estimates that up to 75% of palladium in gasoline car catalysts can be replaced with platinum without loss of thermal stability, but WPIC is conservative in evaluating the options that stipulate a 30% and 50% substitution and believes that it will affect 20% of annual newly launched passenger vehicles, allowing automakers to save from $671 mn to $1.12 bn.


(Source – WPIC Platinum Essentials July 2022)

Sibanye-Stillwater believes that the substitution will drive demand up to 1.5 mn ounces per year by 2024, more than double the WPIC forecast.

Norilsk Nickel is of different opinion. “The project to replace palladium with platinum in autocatalysts, despite being actively promoted in the media by some industry participants, has not yet become widespread, and its direct impact on demand is very limited. We believe that it can become a significant factor for the PGM market in the long term,” the Russian company believes.

Using platinum to replace palladium in gasoline catalysts is not enough to reverse the opposite trend - a decrease in the share of diesel auto vehicles in the sales pattern and replacing them with gasoline hybrids and electric vehicles, Nornickel believes. At the same time, Norilsk Nickel agrees that the long-term prospects for demand for platinum are highly dependent on the development of the hydrogen economy.

Igor Leikin for Rough&Polished