SA is home to more than three-quarters of the world’s primary supply of platinum group metals (PGMs) and the sector is by far the biggest employer in SA mining.
Last year, the pressure on PGM prices resulted in the mining sector shedding nearly 10,000 jobs in the second quarter.
As more countries committed to lowering their carbon emissions, expectations that electric vehicles (EVs) would take the global car market by storm weighed on the demand for PGMs, which are used in catalytic converters to filter the exhaust fumes of internal combustion engines (ICEs).
Over the past six months, however, the narrative has shifted.
The market growth of EVs has failed to meet expectations, and some industry leaders, such as Anglo American Platinum CEO Craig Miller, say higher prices are inevitable.
Others are more cautious. Impala Platinum CEO Nico Muller warns that the industry should brace for more production cuts and retrenchments in 2025.
Business Day spoke to Edward Sterck, head of research at the World Platinum Investment Council (WPIC), an international authority on PGM markets and prices, about what the tariff wars and prevailing geopolitical uncertainty mean for SA miners.
It appears that experts have consistently been overly optimistic about PGMs’ price outlook in recent years. If the global platinum market is in a structural deficit, why have prices not responded to market dynamics?
It is correct that the platinum market is in a structural deficit, but the past two years of shortfalls have followed 2021 and 2022, where there were quite substantial surpluses. Thus, the platinum deficits we are now witnessing are being balanced by supply from above-ground stocks.
However, these are being rapidly depleted. Elevated lease rates and a forward curve in backwardation point to increasingly tight market conditions with the holders of residual above-ground stocks clearly reluctant to sell, but content to lend out at elevated interest rates.
Can you offer any insights on the near-term outlook for SA PGM miners? Should the industry brace for further job cuts, or is some optimism justified?
While the industry as a whole has quite successfully restructured and cut costs, embedded inflation within the mining cost structures means that for some, margins in the broader PGM mining industry remain under pressure at today’s prices.
What are the main PGM applications that tell you demand will be stable or grow in the long term?
Platinum has a broad range of end-uses, the majority of which are supportive of demand exceeding supply for the foreseeable future.
In the near term, slower electrification of the automotive drivetrain supports higher-for-longer ICE vehicle demand for platinum, and the high gold price is pushing consumers towards platinum jewellery as an alternative, particularly versus white gold.
Platinum’s use in a wide range of industrial applications continues to rise at a rate well above global GDP growth as platinum typically increases yields while reducing energy consumption and carbon emissions.
Longer term, we expect platinum demand from the growth in hydrogen applications to become the main driver of platinum demand growth.
How have Donald Trump’s tariffs on US vehicle imports and broader trade wars affected automotive PGM demand?
There remains a high degree of uncertainty about the tariffs and the Trump administration has been clear it is open to bilateral negotiations.
Assuming the 25% tariffs on vehicle imports is kept at that level, we estimate the associated downside to near-term annual PGM demand could be up to 70,000oz of platinum and 260,000oz of palladium (longer term, the effects would be less as more vehicles are produced in the US).
In the more immediate term, there was evidence of consumers bringing forward purchasing into the first quarter ahead of tariffs, and this may see an uplift in demand at the start of the year.
How much does the global growth outlook come into play, and is this a concern for PGM demand or prices this year?
Given ongoing tariff uncertainty, it is difficult to estimate global GDP growth in 2025 with a high degree of confidence.
Declining growth will have an adverse impact on PGM demand, however, our risk assessment of the adverse impact of tariffs is that platinum demand could be reduced by up to 400,000oz in 2025, which is insufficient to eliminate the projected deficit of 848,000oz for this year.
In terms of investment demand, have tariffs driven any increase in investment flows? Is it mostly physical demand, and from what countries? Gold is a well-known hedge against uncertainty; does platinum enjoy the same safe-haven demand?
We include exchange stocks in investment demand, which have seen significant inflows as a result of the trade distortion caused by tariffs.
More broadly, we are seeing spillover of investment into platinum due to the elevated price of gold. Platinum offers many of the precious attributes of gold, despite its price being rangebound for several years.
Platinum’s downside price risk appears low as it is well supported by widespread buying at $900/oz, and it is increasingly difficult for investors to ignore a metal in structural deficit that is yet to reflect that in value.
Turning to supply, how do you expect mined PGM supply to change this year? Is it expected to fall significantly, and what are the big drivers there?
Our published Platinum Quarterly data shows that platinum mine supply is forecast to decline by 5% year on year in 2025, but this is more reflective of 2024 being boosted by a release of work-in-progress inventory than a leg down in mined output this year.
Nonetheless, the longer-term trend remains one of reduced mine supply, with projected 2025 output 6% lower than the 10-year average since 2014.
It is worth noting that recycling supply is also under pressure, being down 30% from 2019 levels and with a long-expected expected recovery in volumes being continually pushed back as consumers are driving cars for longer.
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