THE market might be in the foothills of a platinum price recovery as automakers had “started to do some work” on how the metal could be used as a substitute for palladium, the dollar price of which had improved 48% in 2019.
This is the view of outgoing Anglo American Platinum (Amplats) CEO, Chris Griffith, although he tempered his forecast saying broad adoption of platinum in autocatalysis was 18 to 24 months away.
“For first time fabricators are starting do so some work which is … the first signal on substitution,” said Griffith at Amplats’ annual results presentation in which the firm recorded some R100bn in annual revenue. Of this number, 58% was derived from palladium and rhodium sales.
Substitution of platinum for palladium hadn’t been adopted sooner because automakers had been under unique pressures of their own including “… pressure from society on issues such as climate change”, he said.
Auto-manufacturers have had “much bigger problems” that the cost of palladium and rhodium, which gained 73% in price last year in dollar terms. Only now, with the palladium to platinum price delta lifting the cost of cars to $200per unit (from $70 per unit) have manufacturers begun to worry about the ongoing deficit in metal supply.
Previously, in addition to climate control, there was the Volkswagen scandal of 2015 in which the German company’s cars were found to have produced more noxious gases on the road than in the laboratory owing to ‘doctored’ testing standards, said Griffith. Regaining the trust of the car-buying market through the development of real world driving tests had been a significant pressure.
“OEMs [original equipment manufacturers] are starting to look at this, but not in major way,” he said. “The next 18 months to two years will tell, but it [substitution] could accelerate if scarcity of metal makes its presence felt, and not just in price difference. This is not panic stations because there are solutions that come from the suite of metals.”
Palladium and rhodium prices had been ascendant owing to a deficit in supply, but asked if the market was therefore ‘telling’ the likes of Amplats to start producing more of the metal, Griffith said the company would pause before pressing the growth button.
The company wouldn’t build projects for today’s prices, but there was also an oversupply of platinum metal of between 600,000 to 800,000 ounces annually, excluding 1.1 million oz absorption by the investment market (via ETFs) in the past year.
The solution for OEMS already lay in existing productive capacity for platinum, he said. “The worst possible thing for us is to rush into a project without having done due diligence. We can’t invest only for these prices but throughout the cycle.
“If we had only invested for current prices there would be times in the next 10 years where you will be bitterly disappointed,” he said.
Amplats has also favoured organic growth at marginal capital investment. Griffith said between 300,000 to 500,000 oz in new production had been developed at its tier one mine, Mogalakwena, without “… major capital investment”, and there was scope for more incremental growth. “So we won’t ditch all of our discipline and pile into something.”
Griffith said there were no plans to develop the firm’s Twickenham deposit on its own as it had better growth options. Twickenham also needed a new concentrator which was capital the firm was not interested in spending. For now, Amplats would develop the property’s mine plan and then hoped to progress its sale in the second half of the 2020 financial year.
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