JOHANNESBURG - The outlook for the platinum price is historically weak, according to Paul Dunne, chief executive of Northam Platinum, for three reasons: the advent of battery electric vehicles (BEV), the "Dieselgate" scandal, and lower demand in China for platinum jewellery.
Platinum this week was trading in the $900 (R11720) range.
BEVs
Dunne, in an interview this week, said BEVs don’t use platinum - which was a threat to the platinum industry.
BEVs use lithium-ion batteries, while fuel cars use a combustion engine that requires platinum group metals. The rise of BEVs will have a negative long-term impact on the demand for platinum and palladium. Many countries are beginning to legislate on eventually phasing out petrol and diesel cars.
Dunn said the reality was that BEVs would probably only penetrate the market by 5percent by 2020-2025 and beyond, and then grow. But the jury is still out
He explained why he believed the BEVs could at this point only be taken up by the wealthy, and why at present the sales were contained. “We can accommodate that, but to replace the engine is a stretch too far.
"Range batteries have limitations, with the recharging time and the range. When you go to petrol stations you want to be in and out. A supercharger takes 20 minutes.”
Dunne said a large fuel car could go up to 900km on a tank. At present BEVs can roughly travel 300km to 400km. “BEVs are very expensive and a rich man’s choice."
Dunne said that people bought with their pockets and what they could afford, but they could not afford BEVs at this point. “It is for the wealthy.”
Dieselgate
Secondly, Dunne said "Dieselgate" had impacted platinum prices. Volkswagen’s "Dieselgate" scandal erupted in late 2015, after the car manufacturer was caught cheating on diesel emission tests. This had damaged "diesel share and market share. Diesel has a platinum application, so this is a threat to platinum.” But he said: “Don’t say diesel is dead”
Diesel was a very efficient fuel with 20percent more energy than petrol per litre, he pointed out. “You can make a clean, efficient fuel. The fuel is economic and you can make it clean. We must wait and see what happens with diesel I doubt any car company would risk non-compliance going forward.”
Jewellery
The third constraint was Chinese jewellery, which was in decline. He said this was an important market that had flattened out and recovery was a question mark.
“Buying behaviour has changed,” he said. “Chinese people used to travel to Hong Kong to buy jewellery. Now they travel more, and they buy handbags and other luxury items."
He said Chinese women no longer bought chunky articles of jewellery, but light pieces.
“This strong behaviour change has depressed markets,” Dunn said, adding that the biggest platinum jewellery markets were China, Japan and the US while India was a market growing off a low base.
This week, the GFM Platinum Group Metals Survey 2018 from Thomson Reuters metals consultancy report said the platinum market was forecast to move further into surplus in 2018.