THE RESOURCEFUL MINING ISSUE | 2021
PGMs DEMAND & SUPPLY
We need more palladium Ivanplats, one of the world’s strongest contenders for market dominance in the future of platinum group metals has a motto: ‘we need more palladium’. By Olebogeng Sentsho*
T
hese words were famously uttered by Iron Man from Marvel’s The Avengers film franchise, whose power is derived from a palladium-powered device that sits in a cavity in his chest. This assertion is apt, given that the world is currently running at a million ounce deficit for the platinum substitute. According to Trevor Raymond of the World Platinum Investment Council (WPIC), there will be an estimated 1.5 million ounces of substitution of platinum by palladium by 2025. These metrics inform us that the demand for platinum is growing and is only getting stronger, thereby increasing the need for metals that can substitute it. As demand strengthens and the metal price follows a parallel trajectory, an accurate market overview is necessary for us to understand the ramifications of this increase in demand and the consequences of constrained supply. Substitution is a major factor in demand studies and it is important to understand the economics of the metal being substituted and its substitute. As the largest supplier of PGMs to the global market, the macroeconomic factors in the South African mining industry influence productivity and have a huge impact on the demand and price of platinum.
Global platinum supply The global supply of platinum and PGMs depends largely on South Africa’s ability to produce the
metals. South Africa supplies some 73%, 37% and 82% of global platinum, palladium and rhodium, respectively. The increasing risk of a decline in supply from South Africa is exacerbated by the combined effects of electricity shortages, prolonged industrial action, increased costs, and a significant reduction in capital expenditure worsened by a negative legal and political environment. As a result of South Africa’s power challenges, the continuity of South African production is uncertain. Power utility Eskom has estimated that it will take anything from 18 months to five years to address the issue. This will have a driving effect on global demand, as supply will be constrained by South Africa’s transient power supply.
Increase in the demand for platinum The exponential growth in demand for platinum and its substitute has been driven by several key factors. The drive to reduce emissions and the carbon footprint of fossil fuels has catapulted the world into decisive action and stricter regulations regarding vehicle emissions. In China, regulation 6/VI (which forces diesel particulate filters on all new diesel heavy-duty vehicles introduced to the market after July 2021) is a huge driver for the demand for palladium. In the PGM family, palladium is the most CO2 efficient drive train and, therefore, demand for the substitute
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