Platinum supply has slipped back to pre-Covid levels after the industry slashed about 10,000 jobs and recalibrated operations in response to a plunge in prices, according to the World Platinum Investment Council (WPIC), which has warned that job cuts risk long-term production erosion.
The council said the plunge in platinum group metal (PGM) prices exerted significant margin pressure across much of the SA cost curve, estimating the industry reduced its headcount by 10,000 employees during 2024.
“This 6% headcount reduction is higher than our forecast that SA platinum production will decline by 2% year on year in 2024. Though SA miners have met production guidance so far through 2024, when a shrinking workforce is considered in conjunction with lower capital expenditure, it increases the risk of production erosion in the future,” it said.
“It is worth noting that SA platinum production has declined by 1.7% CAGR [compound annual growth rate] since 2006, which is illustrative of the challenges facing primary platinum supply.
“While the full impact of these actions on production volumes is likely to materialise post 2024, the SA supply forecast for this year is already approximately 0.5 Moz lower than pre-Covid levels.”
Impala Platinum (Implats) CEO Nico Muller has ruled out the development of new PGM mines in SA, saying that the long-term outlook for demand in electric vehicles has reduced the desire to develop assets in the sector.
Demand for PGMs, used mostly for internal-combustion engines, has come under pressure due to the rise in popularity of battery electric vehicles. Implats, which recently posted an annual loss after taking R20bn in writedown charges, has completed its restructuring, resulting in about 4,000 workers leaving the group.
SA, the world’s biggest platinum producer, is bearing the brunt of a plunge in PGM prices over the past year. Anglo American Platinum (Amplats) outlined plans in February to cut 3,700 jobs in SA in a bid to reduce costs by R5bn. Sibanye-Stillwater has already let 2,600 workers go at its PGM operations in SA.
Trevor Raymond, CEO of the WPIC, said 2024 would be the second successive year in which the platinum market would experience a significant deficit, driven by robust demand and ongoing supply vulnerabilities.
“However, even with deficits of this magnitude, the platinum price appears unresponsive. For a long time, price setting has been influenced more by sentiment than by supply/demand fundamentals.
“Arguably, one of the key factors driving sentiment has been expectations of a continued and inevitable decline in automotive demand for platinum in the wake of Dieselgate, in combination with expectations of a rapid electrification of the global drivetrain.” The Dieselgate scandal came to the fore in 2015 when the US Environmental Protection Agency accused Volkswagen of installing illegal software on diesel cars.
Commenting on platinum overall, the WPIC said that the market’s sentiment towards attractive fundamentals appears to be gradually improving, though this has not been matched by a platinum price reaction.
Raymond said that with time market deficits stemming from higher-for-longer automotive demand and continuing supply challenges would mean that above-ground stocks were the supply of last resort.
“The relevance of platinum’s growing role in the hydrogen economy remains as strong as ever. Our forecast for 2024 predicts a significant increase in demand, albeit off a small base, but demonstrating the momentum in the industry,” said Raymond.
Hydrogen fuel cells
“The ongoing allocation and deployment of over $300bn in tax incentives and subsidies from governments worldwide continue to support and potentially accelerate platinum demand in the hydrogen sector. This trend is steadily capturing the attention of global investors, offering a compelling opportunity to engage with assets connected to global decarbonisation efforts.”
Amplats, BMW SA and Sasol signed a collaboration agreement a year ago to bring hydrogen fuel cell electric vehicles and support hydrogen refuelling technology to SA. This week the EU pledged €32m to SA to advance green hydrogen initiatives.
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