The looming Trump administration in the US has added further uncertainty to the outlook for platinum group metals (PGMs) this year, according to a report by Metals Focus, a leading research consultancy in the sector.
The report outlines how Donald Trump’s potentially inflationary policies, including blanket tariffs on Brics countries, could exert downward pressure on PGM prices by forcing the US Federal Reserve to keep interest rates high and weakening global economic growth.
Trump has also threatened to repeal key US environmental policies such as the Inflation Reduction Act, which could lift PGM prices by slowing the growth of battery electric vehicles’ (BEVs) market share.
PGM prices are expected to benefit from the rollback of US electrification targets, with Trump pledging to “end the electric vehicle (EV) mandate from day one” during his campaign last year.
In an effort to stimulate the country’s automotive industry, Trump has promised to reduce corporate taxes and offer new tax credits for auto loan payments, while repealing the $7,500 tax credit afforded to owners of plug-in EVs and fuel cell electric vehicles under the act.
These policy changes could boost US automotive production while slowing down the drive for electrification, both of which would significantly benefit PGM demand by growing the market share of hybrids and traditional vehicles, whose catalytic converters are the primary industrial use of PGMs.
According to the report, every million vehicles replaced by BEVs reduces PGM consumption by more than 150,000oz, and EV adoption is forecast to drop 15%-20% by 2030.
Repealing the act would cut much funding for the US hydrogen economy, limiting that sector’s growth potential.
A key driver of the long term outlook for PGMs, hydrogen-linked demand for platinum is expected to increase tenfold by 2030, contributing 10% of overall demand for the metal. The move is thus likely to reduce future platinum demand while eroding investor confidence in the metal.
Trump has also discussed plans to relax greenhouse gas emission standards during his second term, which would further erode the demand for PGMs.
Some support for PGM prices could come from the US’s strained relationship with the members of Brics, two of whom — SA and Russia — account for more than 80% of the world’s supply of 3E PGMs (platinum, rhodium and palladium).
Trump has threatened to implement 100% tariffs on Brazil, Russia, India, China and SA — the core members of Brics — should they create a currency to compete with the dollar. Still, the changes are unlikely to materialise given that the US has historically been cautious about imposing tariffs on critical materials.
Even when imposing strict sanctions on Russia after its invasion of Ukraine in 2022, the US stuck to a 35% tariff on most precious metals except for palladium, given its reliance on Russian supply.
However, Trump’s tariff threats could still hit investor sentiment, lifting PGM prices in anticipation of future supply disruptions. Concerns about the potential impact of tariffs on precious metals led to a sharp uptick in the exchange of futures for physical stock across all precious metals in December, said Metals Focus.
“Such squeezes and potential dislocations, encouraging stockpiling, are likely to support PGM prices,” reads the report.
Trump has also pledged to bring about an end to the Russia-Ukraine conflict, which could see the US lifting sanctions against the aggressor. A flood of unsold Russian stockpiles, built up over the course of the war, into Western markets could see an immediate drop in PGM prices.
In the long term, an end to the conflict would benefit supply chains, bringing down fuel prices and reducing inflation. This could lead to falling interest rates and stronger economic growth which, with easing supply chains, would boost the demand for PGMs.
Trump’s protectionist policies, particularly the introduction of widespread tariffs, are expected to increase inflation, discouraging the Fed from cutting rates.
Higher interest rates make interest-paying assets such as bonds more attractive than precious metals. Tariff-driven inflation is thus likely to exert downward pressure on PGM demand, further contributing to lower prices.
Overall, PGM prices are expected to benefit from the rollback of US electrification targets and growing geopolitical tension, but the potential gains are offset by relaxed emission standards, tariff-driven inflation, a stall in cutting interest rates and weaker global economic growth.
The outlook for PGMs hinges not only on the implementation of US policy under a Trump administration, but on the international reaction to these policies and the rhetoric about them, said Metals Focus.
“Uncertainty is the only certainty. Fortunately, precious metals thrive during uncertainty,” it said.
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.