One of South Africa’s most important exports is under pressure, with global primary platinum group metal (PGM) production at risk of falling by as much as 20% by the end of this decade, Valterra Platinum CEO Craig Miller cautioned this week.
Miller explained that demand from carmakers, who rely on platinum, palladium, and rhodium in catalytic converters, has remained strong, supported by rising sales of both conventional and hybrid vehicles.
He noted that the transition to cleaner energy is unfolding more slowly than anticipated.
Demand from jewellery manufacturers has also continued at solid levels, according to BusinessTech.
South African mining companies, which produce more than 70% of the world’s platinum, have scaled back unprofitable operations over the past two years following a sharp collapse in metal prices, with some warning the industry was sliding into terminal decline.
Although a recent rally in platinum prices has provided temporary relief, current levels remain insufficient to support new production.
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“Primary supply is constrained and secondary supply is just not coming to the market because the cost of recycling is still too expensive,” Miller told reporters during a tour of Valterra’s converter and processing plants.
He added that the company expects primary supply to shrink by “between 15% and 20%” by the end of the decade due to limited investment in new mines and in extending the lifespan of existing assets.
“You’d need to see the PGM basket price increase by another 50% from where we are now and for it to be maintained at that level to incentivize new greenfield production coming online and earning a sort of a 10% return,” Miller said.
He also stressed that expectations for the energy transition had been too optimistic.
“The energy transition is not going to be as anticipated, so we could see ICE (petrol) vehicles or hybrid vehicles around for a lot longer,” he said.“Hybrid vehicles have more PGM loadings than an ICE vehicle does.”
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Image Credit: Reuters
