SOUTH African-based platinum group metals (PGMs) producers could be in for a big pay cheque this year as supply disruption of palladium from Russia has enhanced demand for the globally sought-after metal and shot up its prices.
Paul Wilson, the chief executive of the World Platinum Investment Council (WPIC), said yesterday that early indications were that supply disruption of palladium from Russia might enhance platinum demand.
“While global economic growth in 2021 surprised to the upside and was expected to stay strong in 2022, the consequences of the Russian invasion of Ukraine are difficult to predict at this juncture,” Wilson said, commenting as the WPIC yesterday released its Platinum Quarterly for the fourth quarter of 2021, with a full year review of 2021 and revised forecast for 2022.
This as palladium hit an all-time high this week, rising above $3 000 (R46104) an ounce from $1 900 an ounce at the start of the year, on mounting concerns that exports from top producer Russia could be disrupted as a result of sanctions against the country after it invaded Ukraine.
Russia produces between 25 and 40 percent of global supply of palladium, which is mainly used by automakers in engine exhausts to reduce emissions.
However, with the sanctions imposed by Western countries on Russia over its military operation in Ukraine, South Africa has now become one of the top platinum producers.
Last year global demand for platinum was robust and becoming more diverse, Wilson said.
Automotive platinum demand grew 11 percent, or 250 000 ounces in 2021, lifted by implementation of more stringent emissions legislation and substitution of platinum for palladium, he said.
For 2022, the WPIC sees a rise in vehicle production, a bigger share of heavy-duty vehicles being fitted with platinum-loaded after-treatment systems and the continued substitution of platinum for palladium driving automotive demand increase by 19 percent, or 509 000 ounces.
South Africa has more than 80 percent of the world’s platinum reserves and has 4 integrated primary platinum producers, with Anglo American Platinum, Impala Platinum, Sibanye-Stillwater, and Northam Platinum.
However, the WPIC said the platinum surplus of 1 232 000 ounces in 2021 was forecast to reduce by 47 percent in 2022 as Covid-related and operational disruptions gradually settle.
The WPIC’s Platinum Quarterly said that Covid-related factors and operational disruptions played out particularly during the second half of 2021, having a huge impact on both the supply of and demand for platinum.
This saw total platinum supply increasing by 21 percent while total demand decreasing by 9 percent year-on-year, but this surplus is forecast to reduce to 652 000 ounces as these issues normalise in 2022 with increasing demand.
Wilson also said the role of green hydrogen was now more widely accepted as being part of the route to decarbonisation, which has benefits for platinum, being used in both electrolysers to produce green hydrogen and in hydrogen fuel cells.
“Investors are becoming increasingly aware of platinum’s key strategic role in unlocking hydrogen’s crucial contribution to achieving global net zero targets,” he said.
“Furthermore, the role of green hydrogen in reducing European gas imports could drive a strategic acceleration of electrolyser construction, which would benefit platinum directly but also support the infrastructure needed for broad-based commercial adoption of fuel cell electric vehicles.”
BUSINESS REPORT ONLINE