A fund run by one of South Africa’s largest asset managers has altered its approach on platinum, seeing better returns from betting on the physical metal, while offloading shares in companies that produce it as they grapple with a power crisis.

Coronation Fund Managers, which oversees about R623-billion, has reduced the Impala Platinum Holdings and Northam Platinum Holdings shares in its resources fund this year, and cut its position in Anglo American Platinum parent Anglo American. The moves reflect strains on miners from a crippling electricity shortage in the world’s biggest producer of the metal.

Record power shortages are forcing South African companies to spend millions of dollars on fuel for generators so that they can operate during rolling blackouts. The worsening impact on platinum miners’ production and costs is set to flow through to their results over the next three to six months, while also pushing prices of the metal higher, Coronation said.

“We have reduced our holding in the platinum group metals shares and instead bought platinum, which should actually be a beneficiary of South African costs going up,” Nicholas Stein, who runs the Coronation Resources Fund with Nicholas Hops, said in an interview in Cape Town. “By virtue of not owning a lot of PGMs now we don’t have too much South African operating exposure.”

Platinum prices are expected to fare better than those of the other two PGM metals as supplies tighten, said Stein. “Within the basket, we expect platinum to move into deficit and palladium and rhodium into a surplus.”

While diversified giant Anglo American remains the largest single holding for Stein and Hops, two exchange-traded funds backed by physical platinum — the 1nvest Platinum ETF and the New Gold Platinum ETF — were ranked sixth and seventh by the end of the first quarter.

Platinum has declined by about 5% this year, less than the slump in the Johannesburg-traded shares of its producers. Impala and Anglo American Platinum have dropped by at least 20%, while Northam is down 15% as of Wednesday’s close. The Coronation fund, meanwhile, is down less than 1%.

Demand for platinum from carmakers will likely continue to accelerate, boosted by increased use of the metal in gasoline autocatalyst and tighter emissions rules in China and India, Bloomberg Intelligence analysts Emmanuel Munjeri and Grant Sporre wrote in a note on June 6. “Automotive platinum demand, in decline since 2015 as diesel cars lost market share in Europe, could recover to previous levels by 2025,” they wrote.

Industrial demand for platinum, meanwhile, could rally 14% this year, spurred by the needs of the glass industry, before falling 8% in 2024, Munjeri and Sporre said. They also see scope for “robust” demand from investors, with their holdings of platinum in ETFs rising by more than 310,000 ounces this year, while it has more favourable fundamentals than its sister metals.

Impala Platinum declined to comment on the changes in the fund’s holdings, while Anglo American and Northam didn’t respond to requests for comment.