The world’s biggest platinum miner will use a combination of extracting the best from its assets and game-changing technologies to step up production and remain cost competitive in an increasingly positive market for platinum group metals.
Contrary to the negative sentiment on platinum, Anglo American Platinum (Amplats) sees a positive market developing for the metal as it is used to substitute more expensive and less available palladium used to make autocatalytic converters in petrol engines to clean exhaust emissions.
Palladium prices overtook those of platinum in 2018 and the gap is widening as demand for the metal, predominantly supplied by Russia’s Norilsk Nickel, and SA, outstrips supply, particularly as countries enact strict emissions legislation.
A big jump in demand is expected from China in 2020 when it imposes tougher emissions regulations than Europe and could add more than 700,000oz of demand to the palladium market already running in deficit for years.
Palladium is trading at $650/oz higher than platinum, which is at $804/oz.
However, Amplats foresees a time in 18 to 24 months when petrol autocatalyst makers use platinum, which is in a surplus position in world markets, said Amplats CEO Chris Griffith.
“Substitution has to take place in gasoline engines otherwise palladium prices will keep rocketing,” he said. “The fundamentals in platinum are not nearly as negative as sentiment as seen in prices suggests.”
The palladium market received an inflow of nearly 600,000oz of metal coming out of exchange-traded funds and 300,000oz extra coming from Norilsk, he said, pointing out that only 700,000oz of palladium remained in the ETFs, meaning that source could be relied on for only one more serious drawdown of metal.
JP Morgan said it was concerned that a roughly 15% increase in the rand price for platinum group metals would result in mining companies scaling back plans to shut unprofitable or marginal mines, leading to a lower-for-longer platinum price scenario.
Heraeus, a PGM refiner, said an estimated 25-million oz of stockpiled palladium had come from Russia, keeping the market supplied for two decades “with the last sales occurring in 2013”.
Global stocks are nearly impossible to estimate, but have been estimated at between 10-million and 18-million oz, which is equivalent to between one and two years of demand, Heraeus said.
“While not all of this would be immediately available, there are still several million ounces of metal held as liquid stock, so a chronic shortage is unlikely. The question is: at what price will the holders sell?”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.