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PGM Prices Misaligned with Market, Eye Future Recovery

Short-term Distortions Skew PGM Supply-Demand Balance

by Adenike Adeodun

Arnold van Graan of Nedbank Corporate and Investment Banking recently conveyed in a discussion with Mining Weekly that the current low prices of platinum group metals (PGMs) don’t accurately reflect the long-term supply and demand dynamics within the industry. This perspective was shared during a Zoom interview, hinting at potential market corrections due to short-term market distortions rather than indicating a swift return to the bullish market conditions seen in 2021/22.

The fluctuating prices of PGMs, which include metals such as platinum, palladium, and rhodium, are attributed to various short-term factors. These include specific industry movements like the destocking of rhodium by China’s fibreglass manufacturing sector and the relocation of Russian palladium into Chinese markets, potentially at reduced rates. Additionally, vehicle sales over the past few years have not met expectations, particularly those of internal combustion engine vehicles, contributing to the downward pressure on PGM prices.

Van Graan emphasizes the importance of a reduction in PGM production to rebalance market prices. Although some mining companies have begun marginally cutting back on production, more significant measures are anticipated in the near future. The process of restructuring or halting operations at mines is complex and fraught with challenges, including considerations for the workforce and the broader economic impact. However, reduced supply, along with a resurgence in vehicle sales, could catalyze a recovery in PGM prices.

The dialogue also touched upon the impact of the growing electric vehicle (EV) market on traditional PGM applications, such as in catalytic converters. The rise of EVs presents a timeline-dependent threat to PGM demand, with some market forecasts potentially overstating EV adoption rates. This mismatch between expectations and reality creates uncertainty around the future investability of PGMs, thereby influencing current market prices negatively.

Furthermore, the conversation explored the role of PGMs in the transition to cleaner energy sources, particularly through fuel cell technology and hydrogen energy systems. Despite the longstanding discussion around these technologies, recent advancements and a global push towards decarbonization have brought them closer to commercial viability. PGMs, known for their unique chemical properties, are expected to play a significant role in these emerging energy solutions. However, the demand from these new applications, while growing, has yet to significantly impact the overall PGM market.

Looking beyond automotive applications, there is optimism for PGM demand in various industries. Mining companies are actively exploring alternative markets for PGMs, leveraging their unique characteristics for broader applications. As the world seeks sustainable energy solutions, the versatility of PGMs positions them as valuable contributors to achieving global energy transition goals.

In summary, the PGM market is currently navigating through a complex web of short-term disruptions and long-term potential. The evolving automotive industry, with its gradual shift towards electric vehicles, and the promising developments in fuel cell technology, underscores a period of transition and adjustment. The anticipated adjustments in PGM production, coupled with the exploration of new market avenues, suggest a dynamic future for these critical metals. As the global economy moves towards greener energy solutions, the strategic importance of PGMs, both in traditional industries and in emerging technologies, will undoubtedly shape their market trajectory in the years to come.


Source: Mining Weekly

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