SOUTH Africa’s big three platinum group metal (PGM) producers last month unveiled production growth plans of up to 1.2 million PGM ounces annually, but the increases are probably insufficient to bring the market back into balance, they said.
“I think there is a very low risk of oversupply,” said Nico Muller, CEO of Impala Platinum (Implats) which on February 25 announced it would spend R7bn adding 360,000 oz in PGM production from mines it controls. On an unattributable basis, accounting for joint venture partner contributions, the total project capital expenditure would be R10bn.
“In fact, I think the risk is the opposite. We need to show the world that we can invest in future demand,” said Muller. South African produced about seven million ounces of PGMs in the last 12 months, an 18% year-on-year reduction, according to the Minerals Council in its 2020 review.
“There are growing deficits for palladium and rhodium and improve prospects for platinum,” Muller said. “We also have to take into consideration that the Lease doesn’t have an infinite life.” The Lease Area, now known as Implats’ Rustenburg assets, contributed 39% to total concentrate (6E) production in the six months ended December, equal to 660,000 oz of 1.2 million oz.
Supply fragility ranks among the greatest of risks to stable PGM pricing. Russia’s Norilsk said last week water ingress would halt production from its Polar division which last year accounted for 10% of palladium supply and 5% of platinum supply, according to a report by JP Morgan Cazenove.
Natascha Viljoen, CEO of Anglo American Platinum (Amplats) said the company’s proposed expansion plans – in which PGM production could be increased between 300,000 to 600,000 oz/year – were “considered and disciplined”. The company forecast a supply deficit in the three principle PGMs – palladium, platinum, and rhodium – into 2022.
Demand growth for PGMs from hydrogen technology and fuel cell applications in electric vehicle batteries was behind the deficits.
Speaking at Amplats’ annual results presentation, Benny Oeyen, executive head of the group’s market development, said: “We think hydrogen is here and here to stay and will have a serious role in energy and in transportation decarbonisation”.
Government, especially from China, and private capital, was being diverted into both the so-called hydrogen economy and in fuel cells, he said. “There is a massive movement of investment of private capital. One of the key reasons for this is there is such a strong realisation that carbon emissions have to come down. “30 years ago people talked about it, but it was not as serious and as imminent as it is right now,” he said.
Neal Froneman, CEO of Sibanye-Stillwater, said he expected growing PGM demand to be extended to the entire chemical suite, including iridium and ruthenium, which hadn’t received much attention. Sibanye-Stillwater has approved two brownfield expansions at its Marikana assets (formerly Lonmin), which would add 250,000 oz of PGM production.
“They will be impacted by the hydrogen economy,” Froneman said at the firm’s annual results presentation. “It will be very disruptive and we want to be associated with this.”