JOHANNESBURG (miningweekly.com) – The rebound of car sales and heavy-duty vehicle sales in China bodes well for platinum group metals demand as the world’s coronavirus lockdowns ease.
A weekend Kitco News video on Platinum Group Metals president and CEO Michael Jones outlined the spurt in car sales in China and a note on LinkedIn by World Platinum Investment Council (WPIC) research director Trevor Raymond, together with WPIC manager investment research David Wilson and WPIC investment development manager Brendan Clifford, spoke of the quick recovery in Chinese heavy-duty vehicle production being under reported.
“There is a very drastic rebound in car sales," Jones told Kitco News on video. His North American-listed company is developing the Waterberg project in Limpopo, the definitive feasibility study for which highlights a fully mechanised, shallow, decline access palladium, platinum, gold and rhodium (4E) mine, with steady state production of 420 000 oz/y of 4E and a 45-year mine life on current reserves. Peak project funding is estimated at $617-million.
“Amazingly, the car sales in China in April 2020 were more than those of April 2019. We actually saw the numbers rebound,” said Jones.
Meanwhile, the WPIC researchers noted that the most visible trend over the first five months of this year has been the quick recovery in Chinese heavy-duty vehicles production, 90% of which have diesel engines. Mining Weekly can report that platinum is the catalyst of choice for diesel autocatalysis used to curtail vehicle exhaust emissions.
The platinum price is now at all-time lows relative to gold and at record lows relative to palladium. The discount to palladium has deepened in 2020, increasing incentives for automakers to substitute platinum for palladium to bolster Covid-19 impacted margins.
Platinum’s demand among investors, WPIC reported, has surged as institutions begin to factor low price and positive fundamental outlook.
GLOBAL AUTOMOTIVE SALES
Globally, Covid-19 has negatively impacted the overall automotive sector significantly in 2020 and by the end of June, global light vehicle sales were 30% lower year-on-year, with European sales down 43%.
Automotive demand accounts for 40% of annual platinum demand and these headline trends negatively impacted platinum investor sentiment, the WPIC researchers stated. However, the aggregate data hid several positive platinum and diesel trends, they added.
In February, factory shutdowns in China reduced heavy-duty vehicle production by 51% year-on-year and led automotive market commentators to forecast double digit contractions for 2020. However, cumulative Chinese heavy-duty vehicle production from January to May 2020 was almost 8% higher than in 2019. So, both car production and truck production are up.
Should heavy-duty vehicle production from June to December 2020 remain at the same level as in 2019, this together with actual sales would, the researchers calculated, increase platinum demand in 2020 by between 14 000 oz and 85 000 oz, depending on the portion of China VI emissions compliant vehicles automakers choose to produce over the remainder of the year.
In Europe, sales of mild-hybrid diesel cars have also bucked the down trend in overall European light vehicle sales this year. In the UK, diesel mild-hybrid sales surged by 211% year-on-year in first half of 2020, double the rate of growth in gasoline hybrids.
Similarly, in Spain first-half diesel-hybrid sales were up 44% with gasoline hybrid sales down 9%.
Total hybrid sales in Germany in the period were up by 55%, helped by German automakers such as Audi, BMW and Mercedes offering diesel-hybrids across more of their model ranges.
Growing diesel-hybrid helped stabilise Europe’s diesel market share at 30% this year, with new model launches likely to reverse its downtrend in recent years, the WPIC team stated.