JOHANNESBURG (miningweekly.com) – Battery electric vehicles such as municipal buses and trucks are being converted into hydrogen fuel cell vehicles by China.
“China already has a very well-established infrastructure to charge batteries and run battery electric trucks. But in the north, it’s very cold and we know battery electric vehicles don’t work well in the cold at all. The north also has a lot of solar and wind energy and if they use that solar and wind, it makes the fuel cell trucks and cars very appealing,” World Platinum Investment Council (WPIC) director of research Trevor Raymond revealed in a Zoom interview with Mining Weekly. (Also watch attached Creamer Media video.)
“So, what they’re doing now is converting nearly that entire fleet in their main cities from battery electric vehicles to fuel cell vehicles . . . to give their fuel cell industry critical mass in order to roll out new fuel cell trucks into northern China.
“That’s a really big demand for platinum and a great long-term future for this metal. It’s a good long-term story and it’s driving more investors to consider platinum, and when investors consider platinum, they come in and see the fundamentals, which show more demand.
“For example, in China, jewellery demand has gone down every year for nearly seven years, and it’s going to pick up in 2021. It’s going up by 13%. This is for a whole bunch of reasons but mainly that the gold price went up and gold jewellery is quite expensive and the retailers and manufacturers bought platinum cheaply in March when the price was really low and they are now increasing the sales of platinum jewellery and making money, because the gold price reduced their gold sales,” said Raymond.
Mining Weekly: The WPIC held an important summit that took place in China on Friday, with the high-technology Suzhou Industrial Development Zone involved. What are the event’s potential benefits for platinum?
You’ll recall that we opened our office in Shanghai in 2017 and there is no listed exchange traded fund (ETF) in China, so it’s a little harder for investors to take positions, and we’ve worked very hard to do two things. One is to try to get more manufacturers to produce platinum bars for sale to the retail market, and that certainly is happening. But then a lot of investors in China are extremely interested in platinum. There’s a very strong brand awareness because of jewellery being in the market for many years. But what we’ve had to do is to increase the awareness of platinum. Many people don't know about platinum, and what we do know is that platinum is a very strong industrial metal as well as a precious metal. So, what we’ve tried to do in China is to get the various parties together that are involved in the platinum supply chain, large manufacturers like BASF, Johnson Matthey and Umicore that all manufacture autocatalysts in China, and for them to talk to the industrial users of platinum - for example, those who use platinum to make nitric acid from platinum gauze, and all sorts of industrial catalysts. The other big growth area is the hydrogen economy and fuel cells. What we managed to do is to try to get as many participants in the platinum value chain to talk to each other. Last year 300 people attended and 6 000 were online. This year more than 400 attended and tens of thousands people were online. We think we’ve been able to further increase the awareness of platinum in China. There are many citizens in China who are saving for their own retirement and they’ve known that platinum is better than gold in the jewellery segment, so they’re quite comfortable to put platinum into their retirement savings. We see this as a long-term growth area for platinum investment demand.
Mining Weekly: Could this PGMs summit become an annual event in China?
Yes, certainly. We trialled it last year very successfully. We’ve done it this year and we’ve had very good feedback from the industry about it being an unusual forum that is able to get massive industry players together. They think it’s a good conference, not just for investment demand, but for greater awareness, and also for the industrial participants to consider platinum’s investment potential and the benefit that a good investment segment brings to industrial use.
Mining Weekly: Did the ‘new energy, new material and new ecology’ conference theme highlight the benefits that PGMs can bring?
The stand-out connection is the hydrogen economy, which pretty much bridges the gaps. What we’ve seen with Covid is that many governments are stretched for funding and what they’re doing is making long-term sustainable policy changes and this has heightened the importance of hydrogen as a fuel. To make a haulage truck that is battery driven is very hard so a fuel cell truck has a huge advantage. There’s lots of examples. In Switzerland, they’re using fuel cell trucks to move groceries around, and have a zero-emissions vehicle, and that’s working quite well. To build up a fuelling infrastructure you need about 700 cars to make a hydrogen station economically viable but you only need about 27 trucks, which means that if you’ve got a small truck fleet, you can afford to put the hydrogen refuelling in place. That’s good for governments that don't want to spend money on infrastructure, particularly the battery infrastructure. But the small 3 t to 6 t trucks in Chinese cities are battery electric, and they are quite efficient. Those are all depot-based and they go to the depot overnight to maybe charge and in those large Chinese cities, planning was quite easy. They could put infrastructure in place when they were building. They were expanding, they had a lot of money. To go and retrofit a European city with that same kind of infrastructure is much harder, which is perhaps why we have not seen battery expand as much in Europe. But certainly, China wants to expand the fuel cell strongly, particularly into the north, where it’s cold and has a lot of solar and wind power. The battery electric vehicle had a big boost. Dieselgate automakers said they would then focus on battery. There was a very strong push in the EU for battery and certainly it hasn’t grown as much as wanted, but it has grown maybe 2% to 5%, and that’s great growth. But you’ve heard all these comments about banning internal combustion engines in cities in 2040 and 2030. The problem is if you ban internal combustion engines, and you have to run on battery, then your power grid is just too small to charge all those vehicles. It’s really not feasible to ban internal combustion engines so soon and battery is a massive drain on the electricity, and equally, to get a hydrogen infrastructure in ten years is also too quick and too costly to governments. So, my view is that those bans are going to have to exclude hybrid vehicles and we do know that a mild hybrid diesel vehicle is 31% less carbon dioxide (CO2) than a conventional gasoline engine. But very good for platinum is that as the funding for Covid has sapped government funding, the transition from the internal combustion engine and electric vehicles has been slowed down, and that puts a big focus on the mild hybrid diesel, which is very good for platinum. So, certainly strong developments for platinum. We will have maybe 15%, 20% and maybe even 25% battery electric vehicles over time. The heavy duty fuel cells are likely to be the short-term demand but 10 to 15 years’ time, there’ll be a big chunk of battery, a big chunk of fuel cells and certainly CO2-efficient hopefully mild hybrid diesels on the road.
Mining Weekly: How does the hydrogen economy benefit platinum?
If you think back a year, the hydrogen economy was almost spoken about as a science project. What Covid has done is that it’s made the hydrogen economy an absolute reality that will be rolled out in that five- to ten-year period. Many investors that were not aware of platinum’s strategic role in the hydrogen economy have turned to look at platinum as a potential place to invest. When they do, they don’t see a lot of platinum demand growth for hydrogen, because that’s only small involving heavy-duty trucks in the short term, but what they do see is a market that’s in huge deficit, in which there is huge interest and a price that is extremely deeply discounted to both gold and palladium. The amount of substitution that is likely to occur is high. There are likely to be more diesel cars on the road in Europe because of the next CO2 fines. So, a lot of investors are hearing about the hydrogen economy, looking at platinum and then finding a very interesting opportunity and investing in platinum. So, the short term consequence of the hydrogen economy is more investment demand. We’re forecasting 600 000 oz of bar and coin demand and that is the man-in-the-street that is actually paying, in a lot of cases, a premium for a bar and a coin, and they’re paying VAT on top of it. They tend to hold on to those bars and coins for a long time and it's really good for sticky demand. In addition, we’re finding more and more investors that have never owned platinum, but have owned gold, suddenly owning platinum. I think the developments are certainly driving strong investment demand and are good for this metal that is precious to South Africa.
Mining Weekly: Do you think that PGMs could be entering a super cycle of being stronger for longer?
Certainly, we’ve had palladium and rhodium being in significant deficit and demand over the last few years. Those prices are incredibly strong. We know that the balancing between these PGM markets has happened over a very long time and typically that balancing would, at the moment, be platinum substituting for palladium in autocatalysts. On being a super cycle, I think certainly the demand growth potential for all three of these main PGMs, as well and the minor PGMs – minor PGMs are being used more and more in all sorts of industrial applications – is strong. So, I think stronger for longer is most certainly the demand situation. The markets are well aware of the overall shortage of PGMs in aggregate. Interestingly, investment demand has been extremely strong this year and certainly is why we have this very large deficit. What investors in the ETF market are seeing is that there’s been a sharp reduction in South African supply, less of a reduction in demand and that it’s likely to continue. Precious metals are still in strong demand and certainly people are joining the dots between the hydrogen economy and platinum, and that’s seen a lot more investor demand come in. So, we think this is likely to continue to be strong during 2021 and certainly it is always good to have the investment demand view reflected in the price.
MISSION IN CHINESE MARKET
WPIC was created in 2014 by six of the world’s leading platinum producers. WPIC’s members are Anglo American Platinum, Impala Platinum, Northam Platinum, Royal Bafokeng Platinum and Sedibelo Platinum.
WPIC's mission in the Chinese market is to explain to investors the investment characteristics and potential of platinum and it provides analysis of the global platinum market and helps investors to understand and access different platinum investment products and channels.
Platinum is an eight-million-ounce annual market, with six-million ounces of supply coming from mining and two-million ounces from recycling – mainly from autocatalysts, when cars reach their end of life, and from jewellery, when pieces are traded-in for larger items.
Eighty per cent of platinum primary supply comes from mines in Southern Africa, an unusual concentration for a global commodity.
Demand has traditionally come 40% from automotive, 37% from jewellery, 20% from industrial, with a small amount from investment over the last several decades.
The mere presence of a single molecule of platinum can make a reaction occur. This catalytic effect is at the heart of platinum’s use in petroleum refining and in cleaning the emissions from cars. In the 1970s air quality in California was extremely poor. The application of PGM autocatalysts cleaned the air and kept the internal combustion engine on the road. Gasoline engines predominantly use palladium catalysts and diesel mainly platinum. This is currently transitioning to partially re-balance these two markets, with platinum replacing more expensive palladium on a one-to-one basis in both gasoline and diesel autocatalysts.
Medical devices that stay in the human body (and must be inert) or need to be visible for surgeons during surgery are made of platinum – many smaller than the tip of a pencil. There are 700 000 heart pacemakers fitted each year with platinum leads and many components made of platinum. Platinum in cochlear implants has brought hearing to many.
Platinum was the reason computer hard disk storage was so effective and grew massively. Many personal computers are now using solid state storage, but the huge growth in cloud storage uses hard disc drives that contain platinum.
Platinum investment is widely made through the purchase of bars and coins, platinum-backed ETFs and physically-backed platinum bank accounts and retirement accounts.
Observers now realise that platinum will increasingly play an invaluable role in responding to some of mankind’s greatest challenges: healthcare, food production and reducing climate change.
“There has been significant global investment in the automotive sector to reduce greenhouse emissions. Battery electric cars are seen as a helpful way to reduce these emissions. The reality, however, in my view is that few designs, built and operated only in clean electricity markets make a contribution to reducing CO2," said Raymond.
“Currently, most battery electric vehicles are no cleaner than an efficient modern diesel. Fuel cell electric vehicles are a very clean transport alternative, that will contribute to reducing global warming, when fuelled with green hydrogen. This technology depends upon the use of platinum. Fortunately, fuel cell electric vehicles are 80% similar to battery electric vehicles in construction. Hence, future fuel cell electric vehicle platform costs will benefit from the accumulated volume economies provided by battery electric vehicles,” Raymond added.