Impala Platinum (Implats) CEO Nico Muller has doubled down on his cautious outlook for platinum group metals (PGM), urging platinum producers to keep the doors open for further production cuts and retrenchments.
Addressing a PGM conference on Thursday, Muller agreed with the prevailing view that demand from hydrogen fuel cell electric vehicles (EVs) does represent an opportunity to offset the long-term decline in automotive demand for the metals. Still, he said this long-term rebound in demand is premised on “highly speculative” projections about how technology will evolve.
He also emphasised that, unlike platinum, “the concern for palladium and rhodium is that they do not have the applications in fuel cell EVs and hydrogen fuel cells”.
“I’m acutely aware that when we look at the long-term correlation between our forecasts and the reality, there are huge gaps. The current reality is that a significant part of our industry is cash negative,” he said.
“We have a responsibility as companies and as an industry to make sure that we exploit this unique set of metals in a way that contributes to the fiscus of the country, and to the benefit of employees, communities and shareholders.
“The one thing I think we’ve got room to improve on is cutting back on supply in response to demand.”
We have a responsibility as companies and as an industry to make sure that we exploit this unique set of metals in a way that contributes to the fiscus of the country, and to the benefit of employees, communities and shareholders.
— Nico Muller
Implats CEO
The World Platinum Investment Council (WPIC) forecasts the global supply of platinum will continue to fall this year. Dwindling demand, together with stronger-than-expected automotive, investment and jewellery demand, is projected to result in a platinum deficit of more than 840,000oz.
WPIC research director Edward Sterck said investors view the rapid depletion of above ground stocks as “an unsustainable situation, which should reflect in pricing”.
Muller’s caution contrasts with the optimism of the WPIC and of Anglo American Platinum (Amplats) CEO Craig Miller, who has been highly vocal about his bullish stance on PGM demand, insisting that the slower-than-expected electrification of vehicles’ drivetrain and constrained PGM supply will support an uplift in prices.
“We have a positive view of the market and that’s underpinned by demand factors and supply factors,” Miller said on Thursday.
“Based on the available information, primary supply is likely to decline by 16%-20% by the end of this decade. Secondary supply underdelivers year in and year out. That’s going to continue to exacerbate the deficit, particularly in platinum and rhodium.
“We recognise that in the short term it’s going to be volatile, but fundamentally if you have deficits in the sector, that has to translate into a price recovery.”
No new mines
Where Miller and Muller do agree is that new PGM mines are unlikely to be developed in SA any time soon as current and consensus forecast prices in the PGM sector aren’t high enough to attract capital.
In contrast to Miller, however, Muller emphasised that optimisation, including further restructuring in response to the reality of PGM demand, would be vital to ensuring the industry can operate on a profitable basis over the long term.
“Structural deficits are not the only thing that affects price behaviour — it also has to do with perceptions, and the [prevailing] view that we, as an industry, cannot cut supply,” Muller said.
“It’s important that as an industry we are willing to cut supply, that we do not only finance ourselves through cash cost periods, but we also find a way to curtail supply,” he said.
“Anglo went through a major restructuring announcement a number of years ago, but there were major government objections and union involvement and ultimately we only saw a portion of it transpire.”
He said that while Implats’ balance sheet was healthy, “it would be incredibly lazy for us not to use that position to optimise the business, including portfolio considerations”.
Muller’s more bearish stance on the PGM market relative to other mining CEOs is well documented. At the release of the group’s 2023 annual results in August, he ruled out the development of new PGMs in SA, saying the long-term demand outlook for EVs made new mine development in SA “highly improbable”.
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