Platinum mining firms betting on fuel cell vehicles to help boost demand for the precious metal and lift moribund prices are in danger of having their hopes dashed, at least in the medium term: electric and hybrid cars are taking a bigger share of the market.
The world’s three largest platinum producers Anglo American Platinum (Amplats), Impala Platinum and Lonmin are all investing in projects related to fuel cell technologies, which generate electricity that can power vehicles by combining hydrogen and oxygen over a platinum catalyst.
But analysts doubt fuel cell vehicles will rival the growth of their electric counterparts, mostly because battery recharging stations are less costly and already more widespread than hydrogen refuelling stations.
“As out of the two new technologies only fuel cells use platinum, I guess the miners think they have no choice,” Macquarie analyst Matthew Turner said. “But people are buying electric cars… and that’s not the case for fuel cells.”
Amplats, which has invested about $35 million (R425m) in the last five years in companies developing new uses for platinum, mostly through fuel cell technology, is mindful of the stakes.
“I don’t want Anglo American Platinum, or any of our partners or customers to be a Kodak,” Amplats chief executive Chris Griffith said last week, referring to the once mighty photography pioneer that was slow to transition to digital photography.
“If fuel cells are not adopted, we may have no car market for platinum by 2050.”
A car industry dominated by batteries will reduce platinum demand to 2.5 million ounces in 2050 from 3.4 million ounces at present.
But if fuel cell cars dominated the alternative vehicle segment in Europe, platinum demand was estimated to be 6.6 million ounces in 2050, Griffith said.
Hybrid and electric vehicles made up about 1.8 percent of all new car sales in the EU in 2013, twice as high as the previous two years, according to the latest figures available from the International Council of Clean Transportation.
Fuel cell vehicles, on the other hand, are estimated to make up just 0.015 percent of global light vehicle production in 2025, according to platinum producer Lonmin. A total of around 60 million cars are produced globally each year.
“I don’t believe fuel cells are going to be a positive part of the (car) story for at least the next five years,” Liberum analyst Adam Collins said. “The costs of compacting the hydrogen and the refuelling centres – each costs more than e1 million (R13.3m) – are just too high.”
Autocatalysts – which help to make traditional cars more environmentally friendly – remain the major source of demand for platinum, accounting for roughly 3.4 million ounces a year or some 40 percent of total consumption, with diesel catalysts using the largest amounts of platinum.
Tighter European regulation of air pollution benefited platinum producers and catalysts makers over the past two decades. But recent research shows that while diesel cars emit less carbon, they produce higher levels of other pollutants such as nitrogen oxides.
Data provider LMC Automotives forecasts that diesel vehicles’ market share in Europe will drop to around 39 percent to 44 percent in 2022 from a peak of 56 percent in 2011.
At the same time, vehicle makers are reducing the platinum content in vehicles to cut costs. Platinum prices fell to six-year lows of $1 083 an ounce in March, hit by slowing demand growth and an overhang of stocks.
Fuel cells vehicles, if they do take off, will certainly be a boon for battered platinum producers.
While electric cars do not need catalysts and hybrid models require small amounts, fuel cell powered cars use between five and 10 times more platinum than a diesel catalytic converter, which typically uses three to seven gramme.
“The next big shift for platinum group metals is fuel cells, I’m confident of that,” Amplats’ Griffith said – Reuters