Markets love a good obituary. Twelve months ago platinum group metals (PGMs) were being written off as collateral damage in the global electric vehicle fairytale. Palladium was collapsing, rhodium had imploded from its pandemic-era insanity, platinum was treading water and analysts spoke solemnly about “structural demand destruction” as though the internal combustion engine had already been banished to museums.
Fast forward to early 2026 and the tune has changed sharply. The PGM basket has surged more than 25% in dollar terms over the past year to an average of $1,852 per PGM ounce. Given that platinum is nearing $3,000/oz and palladium closed above $2,000/oz on Monday, the sector is comfortably back above levels that make marginal production profitable.
The whispers around rhodium are turning into bets on material price increases over the next two years. The market has woken up to the fact that the internal combustion engine isn’t dying nearly as fast as policymakers promised, and the hybrids replacing it are often even hungrier for PGMs.
What has underpinned this PGM rerating is Europe’s pragmatic retreat from its once absolute electrification timetable. After intense lobbying from Germany, Italy and France, alongside carmakers such as Volkswagen, BMW, Mercedes-Benz and Stellantis, the European Commission softened its headline 2035 zero-emissions mandate for new cars and vans, replacing it with a 90% fleet CO2 reduction target versus 2021 levels, allowing the remaining 10% to be met through offsets such as e-fuels, biofuels and low-carbon manufacturing inputs.
In practice, this keeps efficient combustion engines and hybrids commercially viable well beyond 2035. Interim compliance has also been loosened through “banking and borrowing” flexibility between 2030 and 2032, while the 2030 CO2 reduction target for vans was cut from 50% to 40%.
In short, PGMs are enjoying a demand renaissance just as supply is tightening. When scarcity meets stubborn demand in a tiny commodity market, prices explode. Nobody understands this better than Noah Capital’s PGM analyst René Hochreiter.
Bullish on rhodium
Never one for breathless cheerleading, Hochreiter has turned decisively bullish, particularly on rhodium. He expects rhodium to average around $12,500/oz this year, rising to roughly $15,000/oz by 2027. For context, rhodium spent much of the recent downturn below $5,000/oz.
Rhodium is small in volume but enormous in margin impact. When it runs, it drags the entire PGM basket with it. Hochreiter pointed out in a recent note that platinum is “in the second row of most wanted minerals on the American critical minerals list”. South Africa has 90% of global reserves and produces 75% of the world’s supply.
Read: Anglo split cuts Valterra’s costs by R5bn
“The US will likely stockpile as much as it can this year as the stocking war develops. Furthermore, there are deficits forecast for the next 20 years as the diversity of demand for the catalytic properties of the metal surpasses every other metal on Earth. Prices rose more than gold in 2025 because the market perceived a shortage of the metal due to low capex spend for three years as prices crashed in 2023.”
Palladium is in the third row of Americans’ most wanted critical minerals.
“Battery electric vehicle sales are in decline everywhere except China. In Europe, the banning of internal combustion-powered cars has been delayed for the third time in five years, the most recent delay is now beyond 2035 and will probably never happen at all.”
Processing constraints
However, there’s a further twist that makes this cycle potentially even more powerful. As Investec analyst Nkateko Mathonsi highlighted in a sector note in November, mining is no longer the constraint. Processing is. Most producers can extract additional ore if prices rise. Very few can convert extra concentrate into refined metal without enormous new capital investment.
Mathonsi pointed out that only Valterra and Sibanye currently have meaningful spare refining capacity. Implats, the note suggested, won’t enjoy similar flexibility until around 2032. In Mathonsi’s phrasing, Valterra has become the industry’s “kingmaker”.
Hochreiter agreed on the constraint, though he warned it is a classic cat-and-mouse dynamic. Bottlenecks drive prices higher until commercial incentives eventually unlock new supply responses.
Which brings us neatly to Valterra’s remarkable reinvention. When the company, still called Anglo American Platinum at the time, reported full-year results in February 2025, the headlines were grim. Headline earnings were down 40%. Earnings before interest, tax, depreciation and amortisation fell nearly 20%. The PGM basket price had slumped 13%.
Then came the demerger from Anglo American, which brought one-off costs, restructuring pain and accounting noise. But it also delivered a lean, focused, pure-play PGM champion with a simplified organisation, disciplined capital allocation and permanently lower operating costs.
On the surface it looked like another mining casualty of the electric vehicle revolution. Underneath, however, management was executing one of the most aggressive cost resets in the sector. This was confirmed in its recent trading statement ahead of results due on February 25 2026.
A total of R5bn in cost savings were delivered, well ahead of target. All-in sustaining costs are believed to be well under $1,000/oz, firmly placing Valterra in the upper echelon of global cost competitiveness.
Management guided that headline earnings for the 2025 financial year are expected to surge 85%-105%. In mining this is where operating leverage turns brutal. When prices rise off a lowered cost base, margins explode. A 25% increase in the basket price can translate into an 80% jump in per-ounce profitability. Add a rhodium spike into the mix and the torque becomes extraordinary.
Valterra today is a structurally different business and investors wasted no time in repricing this transformation. On February 17 2025 Valterra shares traded around R660. By January 23 this year the price had surged to R1,692, a gain of roughly 156% in less than a year.
That’s a proper rerating. Part of it reflects the recovery in PGM prices. But part of it reflects the market recognising Valterra’s earnings power has fundamentally changed.
What is the market really pricing now? At current levels, Valterra is being priced closer to midcycle, even above midcycle, multiples rather than trough valuations.
Where does it go from here? Commodity cycles have a cruel sense of humour. The question is whether the PGM spring is a short bloom or the start of a long, profitable season. If scarcity has its way, I suspect we’ve only just seen the first flowers.
- Declaration: The writer has shares in Valterra
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at michael@fmr.co.za.
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