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PGM demand, prices likely to remain high this year
By: Marleny Arnoldi
- After resurgent demand pushed the platinum market into deficit in 2019, with the total volume of platinum under investment coming in at a record 3.4-million ounces at the start of this year, speciality chemicals company Johnson Matthey says the platinum market could move back into surplus this year unless investor appetites are sustained.
Last year, more than one-million platinum ounces were added to
exchange-traded fund holdings, outweighing a contraction in global
industrial and automotive demand, as well as a double-digit drop in the
Chinese platinum jewellery market.
Johnson Matthey notes in its latest ‘Platinum Group Metals (PGM)
Market’ report that demand for platinum this year will be supported by
rising PGM loadings on heavy-duty trucks in China and India, where
stricter emissions legislation is due to be implemented.
However, it notes that this will be offset by a further erosion in
platinum jewellery demand and a drop in purchases by the glass sector.
“With weaker primary supplies balanced by further growth in
autocatalyst recycling, investment will again be the primary factor
which determines the direction of market balance.
Platinum supplies in 2020 could fall below six-million ounces for the
first time in six years, reflecting the impact of ongoing
rationalisation programmes in South Africa, a lower contribution from
the release of excess pipeline stocks and the depletion of PGM-rich
surface materials that have supported PGMs output at Norilsk Nickel’s
operations in recent years.
AUTOCATALYST DEMAND
Johnson Matthey explains that while autocatalyst recycling is
expected to rise again this year, it will, at best, offset the decline
in primary supplies.
Recent growth in platinum recoveries reflects the dramatic expansion
in platinum use in diesel catalysts that occurred between 2000 and 2007.
Platinum consumption in light-duty vehicles peaked at around
3.5-million ounces in 2006 and 2007, but fell steeply during the global
financial crisis in 2008; thereafter demand was also affected by falling
diesel vehicle registrations and increased use of palladium in diesel
catalyst systems.
Platinum recycling volumes are expected to reach a plateau in the next few years.
Combined platinum demand in the autocatalyst, industrial and
jewellery sectors is not expected to change much this year. On balance,
Johnson Matthey believes combined demand in these “consumingâ€
applications is more likely to fall than to rise, but this will depend
on factors such as vehicle production volumes and the timing of
industrial platinum purchases for new chemical, glass and petroleum
refining plants.
“In the light-duty diesel market, production volumes will be the
principal factor determining the direction of platinum demand,†Johnson
Matthey notes.
THE CASE FOR PALLADIUM
All-time highs were recorded in the palladium price last year as the
market deficit widened to more than one-million ounces – demand reached
an all-time high of 9.7-million ounces, despite demand for palladium
falling in industrial applications.
Johnson Matthey says that intensifying use of palladium in gasoline
cars in Europe and China pushed auto demand to a record level, despite
lower vehicle output. It adds that the tightening emission legislation
and stricter vehicle testing regimes are driving up the PGMs content of
three-way catalysts in most major vehicle markets.
The palladium deficit is likely to deepen this year, as an increasing
number of Chinese and European vehicles meet China 6 and Euro 6D
legislation, respectively. This is expected to drive up global average
loadings on gasoline catalysts and could lift world automotive demand
above ten-million ounces.
Although secondary recoveries from spent catalytic converters will
continue to rise, primary supplies may fall slightly, reflecting
rationalisation at South African mines and the depletion of
palladium-rich surface materials at Norilsk Nickel.
Johnson Matthey notes that while the market remains in significant
deficit, prices are likely to remain strong, stimulating efforts to
thrift and substitute palladium where possible, and incentivising the
mobilisation of market stocks.
RHODIUM
Rhodium moved into a modest deficit last year, as a small rise in
combined supplies was not enough to meet a 10% increase in total demand.
Global consumption of rhodium on autocatalysts leapt by nearly 15% in
2019, following a step-change in loadings in Chinese vehicles.
Johnson Matthey says car companies in other regions also used more
rhodium, in response to tighter emissions standards and more stringent
testing.
“These gains offset a sharp fall in rhodium use in the glass
industry, as capacity expansion slowed after two years of exceptionally
strong activity.
“Although combined primary and secondary supplies rose by 2%, this
was not enough to prevent the market moving into deficit,†the chemicals
company explains.
The outlook for 2020 is a deepening market deficit with further
strong gains expected in autocatalyst demand, albeit at a slower rate
than last year.
Source: http://www.miningweekly.com/article/pgm-demand-prices-likely-to-remain-high-this-year-2020-02-12/rep_id:3650
