Despite elevated demand for platinum group metals (PGMs), global supply levels of the precious and key auto-industry metal are set to fall this year, partly dragged down by mining companies including big South African operators that are closing loss-making shafts and laying off workers.
South Africa, alongside neighbouring Zimbabwe, has the world’s largest reserves of platinum. The two countries have attracted heavy investment from miners such as Anglo Platinum, Impala Platinum and Sibanye-Stillwater among other smaller players.
But with the global platinum market less rosy, with prices continuously falling, investment and production sentiment is faltering.
The World Platinum Investment Council (WPIC) said yesterday that global mine supply of platinum for 2023 marked a 1% uplift to 5.6 million ounces from reduced supply levels of the previous year.
This year, global platinum mine supply is expected to decrease by 3% to 5.4 million ounces. Sibanye-Stillwater and Anglo Platinum have announced cost savings from their PGM operations, including cuts to production.
Trevor Raymond, the CEO for the WPIC, said, “The economics of mine supply are under threat following the significant decline in the prices of palladium and rhodium, with some supply rationalisation plans already announced. The short-term downside impact on mine supply remains uncertain, but any reduction also severely constrains any near-term supply response to demand growth or higher platinum prices.”
This comes as the global platinum market shifted to a significant deficit of 878 000 ounces in 2023 although total demand surged by 25% year-on-year, reaching 8 million ounces while the total supply of 7.1 million ounces is the second-lowest level recorded since 2013.
Automotive sector demand for PGM for 2023 was 16% stronger at 3.2 million ounces, benefiting from rising vehicle production and a greater hybrid vehicle share. Stricter emissions standards for both light and heavy-duty vehicles, especially in China, also drove demand growth for platinum from the auto-industry.
For Raymond, the “continuing deficits highlight platinum’s demand resilience and supply vulnerability amidst global economic” challenges.
“Platinum’s significant demand growth in 2023 and its expected level in 2024 are to a large extent, predicated on strong automotive demand growth, despite a decline in internal combustion engine vehicle production, the result of stricter emissions legislation, increased hybridisation, and significant growth in the substitution of platinum for palladium,” he added.
Growth in PGM demand for automotive sector was likely to persist this year, although the pace is expected to be muted on a projected marginal year on year firming up of 1% 3.2 million ounces. This will lift up demand from the auto-sector to a seven year high.
Demand prospects were likely to be boosted by continued robust growth in both heavy-duty and hybrid vehicle numbers, alongside stricter emissions legislation and an increase in platinum-for-palladium substitution which is expected to offset the expected overall decrease in global internal combustion engine vehicle production.
In the past year, global jewellery demand for platinum fell 3% to 1.8 million ounces despite a rise in demand from India and North America. Weak demand in China was, however, deeper and the WIPC now anticipate that global demand for jewellery made from platinum will rise by 3% to 1.9 million ounces, boosted by significant growth in India.
Although the South African PGM miners have been roiled by weaker PGM prices, some analysts are hoping for a better outlook, especially on palladium.
“Palladium continues to form what's known as an inverse head and shoulders pattern. This pattern looks a bit like a person's head and shoulders, but upside down (and) often indicates that prices might start going up after a downward trend. Eventually the PGM miners will slow down supply,” said one analyst.
But it may be a long way off, say other analyst. In the meantime, the PGM industry lay-offs continue.
Sibanye-Stillwater and Impala Platinum’s Zimbabwean joint venture, Mimosa mine, yesterday announced that it was laying off 33 managerial and supervisory employees.
“The outlook is that the prices will remain depressed in the medium term. In view of this, we have had to implement several measures to ensure that our business remains viable in the low-price metal environment. This has resulted in a staff rationalisation exercise, which has affected 33 managerial and supervisory employees,” Mimosa said in a statement.
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