Renewable energy driving the demand for PGMs

PGMs DEMAND & SUPPLY

Renewable energy driving the demand for PGMs

For centuries, the silvery-white lustre of platinum has contributed to its appeal in jewellery manufacturing. It is also used extensively in medical applications, but the market that has been the main driver for demand has been the automotive industry. By Prashaen Reddy*

The automotive industry mainly uses platinum in catalytic converters, removing some of the harmful emissions that cars produce. It is also used for the production of electronic products, as a catalyst in the chemicals industry and in the production of fuel cells.

However, over the last five years, there has been a decline in the demand for platinum group metals (PGMs), as the world started shifting to renewables and a circular economy. This challenge has presented the need to look for other uses for this metal. With renewable energy and digital advancements driving the transition, manufacturers have started utilising recycled platinum.

Renewable energy

The world is shifting and change is coming quickly for the traditional internal combustion engine, with many automobile manufacturers now producing electric vehicles and exploring the potential of hydrogenpowered vehicles.

With the decline in mobility driven by traditional internal combustion engines, the need for catalytic converters will decline. Therefore, one of the big areas being explored by PGM mining companies is the support of the rise of the renewable energy battery storage and fuel cell industry. The metal is being utilised and experimented with to help support the storage of energy in battery technology and supporting newer industries. The use of platinum within storage and pollution management technology in the automotive sector is driving big mining companies, who have had large portfolios in platinum production, into the renewable energy market to see how they can monetise platinum in different ways.

Digitalisation

Another space we need to understand is how much of a role PGMs have played in digitalisation and the technology boom, and how much of these metals have been utilised in the electronics world.

One of the biggest changes globally over the last 20 to 30 years has, of course, been the rise in demand for digital components. We have seen this in the evolution of everything from cars and washing machines to smartphones. With the Fourth Industrial Revolution, this is not slowing down, as we are digitising everything. From a communications perspective, and through 5G, we are connecting faster and to everything around us.

With 5G driving increased connectivity, we will need to start including microchips and Wi-Fi chips into everyday devices. 5G is already playing a big role in the

PGMs DEMAND & SUPPLY

automotive sector – just look at autonomous driving and the increased ability to connect and remotely monitor and manage devices.

Another increase in demand for PGMs was seen due to the disruption Covid-19 had on the supply chain. This saw most global manufacturers close shop as the world went into lockdown.

This resulted in the shortage of microchips. At the same time, we saw an increase in demand for these products due to people now working from home and the general increase in mobile and connected devices. All of this is helping to increase the demand for some of these metals.

Sustainability of the industry and investment

While a mineral such as coal has an uncertain future, this is not exactly the case for the PGMs sector; the benefits of this greater certainty have already started to have a positive impact.

We need to remember that the transition to cleaner energy is not immediate. It is a long-term play with a lot of opportunity, if we can get the uses of PGMs in these key growth markets right. If you look at any forecast on investments in renewable technologies and energies, you will see high demand forecasts for semi-conductor chips or processors.

Government has always pushed its broader manufacturing agenda and the beneficiation of commodities mined in South Africa, but the challenge is having the right policies and the enablers in place to allow for local manufacturing.

A great example of this is our local motor industry, which sources a lot of its components locally due to government regulations that have pushed them down that road of promoting local manufacturers. If we want to be serious about the government’s agenda on industrialisation and industrial policy, we will have to start to drive local manufacturing in the above two industries.

For example, we need to localise manufacturing within the renewable energy space to support local growth in renewables and regional growth. There is a lot of funding for renewables, which means that there are many investment opportunities.

The same goes for digital; we need to be thinking about how we localise and produce some of these components. This sector is far more complex and a more intricate industry; it is also very competitive, with the likes of Vietnam, Indonesia, Thailand and China all producing these digital components at a fraction of the cost. If we want to localise this industry, we need to think about our capabilities and utilise the demand that is there.

The African continent is the least digitised of all the regions in the world and, therefore, will have the strongest growth in the use of digital technology. With this knowledge, and as we industrialise, we need to leverage the increased numbers of consumers and our low-cost environment.

Some 80% of the world’s platinum comes from South Africa. We need to look at how we can cut down on exporting all our platinum to other countries. They produce the final products – like batteries, microchips, fuel cells, chemicals, etc. – only to sell them back to us at a higher cost. It’s about how we can utilise, create and become a supplier to global markets at a competitive rate.

Mining companies have also been pushing this agenda for the sustainability of their own industry and need to find other applications for PGMs. At the end of the day, it is really about the sustainability of an industry that will slowly die if it does not reinvent itself and the applications need to keep up with where the world is going.

*Prashaen Reddy is a partner with the global management consultancy Kearney, based in their Johannesburg office.