The platinum market is forecast to move back into surplus this year, despite a 27% gain in autocatalyst demand, according to estimates published in chemicals company Johnson Matthey’s latest platinum group metals (PGMs) Market Report.
South African platinum supplies are expected to rebound by nearly 40%, as Covid-19 disruptions subside and backlogs from processing outages in 2020 are treated, the report notes.
Higher prices are hitting investment, with Japanese bar buying turning negative in early 2021 and exchange-traded fund (ETF) buying subdued. Chinese retailers stocked up on platinum jewellery in the second half of 2020, but the recovery has stalled owing to a narrowing discount to gold, the report indicates.
It notes that the palladium and rhodium markets will also remain in deficit this year.
Both metals recorded all-time high prices early this year, with palladium climbing above $3 000 and rhodium repeatedly surging to $30 000.
In response, automakers have accelerated thrifting and substitution programmes, seeking to reduce the use of these metals in gasoline autocatalysts. Despite this, both palladium and rhodium will see double-digit growth in automotive demand this year, as vehicle output rebounds and major markets phase in tighter emissions regulations and more stringent test procedures.
“The overall PGM content of catalyst systems is still rising, in line with tightening emissions legislation in many regions, and the implementation of real driving emissions testing in Europe.
“This is supporting palladium and rhodium demand, despite aggressive thrifting and substitution programmes at virtually all global automakers.
Meanwhile, platinum’s share of the auto PGMs mix is rising and demand for platinum in gasoline cars will climb steeply in 2021, albeit from a low base. Platinum will also benefit from the phase-in of China VI emissions legislation. Meeting China VI limits requires a complete overhaul of heavy-duty diesel catalyst systems and we expect PGM loadings on Chinese diesel trucks to more than treble this year,” says Johnson Matthey market research director Rupen Raithatha.
Mine supply of PGMs is forecast to recover strongly this year, despite the temporary closure of two Russian mines owing to flooding.
Shipments of PGMs from South Africa will be augmented by the refining of a backlog of about one-million ounces of PGMs that accumulated during processing plant interruptions last year, the report says.
It notes that strong prices will incentivise increased recycling of PGMs from scrapped vehicles, but platinum recoveries will be constrained by technical difficulties in the treatment of diesel particulate filter scrap.
The ‘minor’ PGMs, ruthenium and iridium, have seen steep price gains early this year.
This reflected robust industrial buying, disruptions to South African supply and rising investor awareness of the potential for PGMs use in hydrogen applications, the report says.
Johnson Matthey’s PGM Market Report includes a special feature entitled ‘Green hydrogen for a net zero future: What role for PGMs?'
“Net-zero commitments made by the UK, the European Union, China and, most recently, the Biden administration in the US, will require much greater use of hydrogen as an alternative to fossil fuels and PGMs will play an important role in the hydrogen economy.
“We are already seeing strong growth in demand for platinum in hydrogen fuel cells for stationary and transport applications. In future, we expect to see wider use of PGM catalysts to produce green hydrogen using polymer electrolyte membrane electrolyser technology.
“Although it is early days for the clean hydrogen sector, it is already starting to shift sentiment towards PGMs, particularly platinum and iridium,” said Johnson Matthey principal analyst Margery Ryan.