Platinum mining bosses do not expect metals prices, which have fallen dramatically since last year, to drop much lower this year.
And prices are likely to start recovering next year, they say.
The sharp drop in platinum group metal (PGM) basket prices, which decreased by 33%-40% (depending on the basket composition), resulted in SA platinum miners delaying projects, shutting mining shafts, cutting capital expenditure and reducing employee numbers.
Since prices started trending downward last year, platinum miners have cut or announced their intention to cut about 7,000 jobs, in line with industry expectations. Many of the mining houses also warned that if prices decreased further, they would need to take additional steps that could include further job losses.
But at the PGMs Industry Day in Johannesburg on Wednesday, mining CEOs said that while they were not expecting prices to recover this year, they also did not expect further dramatic decreases.
This outcome could be seen as good news for finance minister Enoch Godongwana, who counts tax take from mining companies as crucial to SA’s fiscal policy, which is under scrutiny from ratings agencies and investors.
“We are forecasting fundamental deficits in the market and therefore don’t expect prices to decline further from this point,” said Nico Muller, CEO of Impala Platinum.
“Our strategy is based on the expectation that prices will remain roughly where they are this year, with some growth next year. All indications are there, though, that PGMs will have price support in the medium term.”
Price trends for metals in the PGM basket could still vary, Muller said, and they were, for now, “more bullish on platinum and less so on palladium”.
Craig Miller, CEO of Anglo American Platinum (Amplats), believed the PGM industry was experiencing structural change, driven, for example, by the growth in demand for battery electric vehicles (which use no platinum, palladium or rhodium). He said the industry could no longer “rely on prices simply recovering”.
“Commodity prices did come down much faster in 2023 than we anticipated, and prices will not necessarily go back as we have previously experienced,” he said. But he was expecting to see some price recovery during 2024. “I certainly think we will see prices for some metals recover, but it will come back to the basket price. We expect sustained pressure on palladium.”
PGM prices weakened in 2023 despite an estimated 7% increase in automotive demand for the metals.
The automotive industry, which uses PGMs for autocatalysts in automotive catalytic converters and exhaust systems, accounts for about two-thirds of PGM demand.
However, as Amplats said in its annual results for 2023, the increase in PGM automotive demand did not translate into an equal increase in sales because car companies added to their inventories in the first half of 2022 as insurance against further supply disruptions after Russia’s invasion of Ukraine.
This was not repeated in 2023, meaning PGM purchasing was lower.
The long-term outlook for PGMs would depend to a large extent on how changes in the automotive industry play up to 2030. Many countries have included a shift from internal combustion engine vehicles to battery electric vehicles as part of their actions to cut emissions in line with global climate change commitments to reach net-zero emissions by 2050.
However, there has been a slowdown in battery electric vehicle growth, which could mean that the shift will not unfold at the rate previously expected.
Elections
Elections in the US and Europe might contribute to this, said Henk de Hoop, CEO of the PGM research and consulting business SFA Oxford.
If Donald Trump was elected president of the US it could support sentiment against environmental, social and governance concerns and result in the rolling back of incentives that have been put in place for the battery industry in the US, he said.
Similarly, some European elections were coming up which could result in a “shift to the right that will also not be as ‘pro-environmental’ as we see now”.
However, growth in demand for new vehicles, whether for electric or internal combustion engine vehicles, would also depend on global macroeconomic conditions, with some major economies still showing little growth.
Neal Froneman, CEO of Sibanye-Stillwater, said that while battery electric vehicles would have a role to play in the future, their expected penetration rates were overstated.
Hybrid vehicles, he said, were likely to play a significant role over the next few years, which would help underpin “solid” demand for PGMs in the period up to 2027.
Over the longer term, the hydrogen industry would become a more important driver of demand for certain PGMs.
In addition, other evolving technologies in the automotive industry, such as the use of hydrogen-powered fuel cells, would help secure the role of PGMs in this industry, Froneman said.
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