The World Platinum Investment Council hopes the inclusion of the DA in the recently announced cabinet of the government of national unity (GNU) and tariffs on Chinese vehicle imports could drive changes that further support the positive investment case for platinum.
The council said the outlook for automotive platinum group metal (PGM) demand beyond 2030 may also be higher than expected due to right-leaning political parties gaining seats in the EU parliamentary elections.
“Turning to SA’s elections and the formation of a government of national unity that includes the ANC, DA, IFP, PA and GOOD. The DA’s inclusion may promote economic liberalisation alongside reforms to Eskom, Transnet and the Labour Act,” the council said in a research note.
“Reducing SA’s international risk profile could strengthen the currency and reduce SA PGM miners’ margins. However, regulatory liberalisation would allow miners to be more reactive to market conditions, in both up and down cycles.
Shortfall
“Platinum’s muted price action to deficits between 2023 to at least 2028 may be reflective of a current inability to flex output in response to underlying market conditions.
“Improved SA governance and higher for longer automotive demand are separately or together both supportive of platinum’s investment case.”
SA is the biggest platinum producer in the world, accounting for more than half the world’s supply.
Johnson Matthey, the world’s largest secondary PGM refiner, said that this year the sector is set for its largest supply shortfall in 10 years.
It does not rule out further expenditure cuts and shaft closures in the industry — a bad omen for jobs, particularly in SA.
SA’s platinum producers had to cut thousands of jobs as PGM prices plunged. Producers responded to the drop in prices by increasingly focusing on cost-saving measures and cutting capital budgets as margins become tighter.
The market consensus is that the rising share of battery-electric vehicles (BEVs) will push markets into persistent surplus in the medium term.
The council said its research indicates the platinum market is in a period of sustained deficits and that platinum supply remains challenged, hampered by production challenges in SA.
“Although unrelated events, recently announced US and EU tariffs on Chinese vehicle imports and changes to the European and SA political landscape could drive changes that further support the positive investment case for platinum,” the council said.
“Automotive PGM demand could remain higher for longer if BEV tariffs and weaker green legislation slow BEV uptake in the large US and EU vehicle markets.”
In May, the US increased tariffs on Chinese BEVs from 25% to 100% and in June the EU did likewise from 10% to between 27% and 48%.
China exported nearly 5-million vehicles in 2023, with the US and EU its largest and third-largest markets, respectively.
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