Makers of antipollution devices that use platinum group metals will accelerate their use of cheaper, more readily available platinum instead of expensive palladium that is in short supply, industry experts said on Wednesday.
One of the most pressing questions in the global platinum group metals (PGMs) industry is the timing and the size of substituting palladium in anti-pollution devices on petrol engines with platinum.
Impala Platinum (Implats) sees up to one-million ounces or more a year of substitution in a decade, starting relatively small with 100,000oz of platinum replacing the more expensive palladium used in devices called autocatalytic converters, which scrub out pollutants from exhaust gases.
Total automotive demand for palladium is about nine-million ounces a year, with Russia and SA the two main sources of the mined metal, and recycling matching output of each country.
The palladium market is in a sustained deficit position, which has pushed prices up by more than half in dollar terms in little more than a year, according to Implats.
Platinum is used in diesel autocatalysts and demand is about three-million ounces a year.
Rhodium, which comes mainly from SA, is used in petrol and diesel catalysts. Rhodium prices are up more than 160% because of supply not keeping up with demand of one-million ounces a year.
For makers of autocatalysts, the surging prices for palladium and rhodium have caused concern about costs and revisiting more seriously the proposition of switching some palladium with cheaper platinum, which is near balance or in surplus.
SA is by far the world's largest source of platinum, accounting for more than two thirds of mined supply of six-million ounces. About half of mined production goes into autocatalysts.
Implats, the third-largest source of PGMs in SA and vying for third place in the global rankings with Russia’s Norilsk Nickel, is working with number one PGMs supplier Sibanye-Stillwater and chemical group BASF, in rolling out a catalytic device using all three metals.
Implats expects the makers of autocatalytic devices, which include BASF, Johnson Matthey and Umicore, to switch 100,000oz of palladium consumption with platinum, said CEO Nico Muller at the PGMs Industry Day conference.
He said this was “not a rapid start” considering palladium autocalytic demand was nine-million ounces.
However, the successful work by BASF, Johnson Matthey and Umicore in creating autocatalysts for petrol engines using platinum and growing interest from vehicle makers in China and the EU, meant there would be rapid growth in substitution, Muller said.
In a decade, a tenth of palladium could be substituted with platinum, switching one-million ounces of demand between the two metals, but some market commentators said the switch could be as high as a fifth, Muller said.
This meant there would be “significant security” for platinum, he said.
Platinum will have a forecast surplus of 600,000oz in 2020, a factor that has kept its price increase at about 6% in the 12 months to end-June. Moving some of that metal into a new source of demand should buoy prices.
Palladium will have a 350,000oz deficit and rhodium a 75,000oz deficit.
Moving palladium closer to a balance should lower the price.
Lack of investment in new SA PGM mines
Steve Phiri, CEO of Royal Bafokeng Platinum, noted there was relatively little money going into new mines in SA and that in a decade — which is roughly the time it takes to bring a large underground mine into production — old shafts would begin closing.
“Most PGMs mines in SA are old and near depletion if we don't invest in them. Where will the market get metal from apart from recycling?” Phiri said. RBPlat is one of the few companies bringing a large new mine into production.
“There will be life after Covid-19 and there will be demand growth for all three metals. I shudder to think in 10 years when mines close,” he said. “More growth capital needs to be spent, but I'm not sure the prices now will sustain big projects.”
The ability for SA to meet market demand was a major concern for the industry, said Natascha Viljoen, CEO of Anglo American Platinum, the world number two PGM supplier.
Referring specifically to rhodium, she said the biggest risk to damaging demand came from SA's inability to meet market demand compared to the high price and that this could push automakers into adopting alternative drive trains, an industry expression for engines.
For Implats, the continuing supply constraints and rising cost of electricity from Eskom, the state-owned, deeply indebted power monopoly, would be a factor in decisions about where to invest in growth projects, with Canada and Zimbabwe offering better options, said Muller.
“Eskom has an impact on industry that is more pronounced than Covid-19,” he said.
Viljoen said SA was losing a lot of value-creation potential because of the lack of electricity when it came to processing the base metals — most notably nickel and copper — that are a by-product in Amplats’s PGMs output.
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