THERE was a 13% increase in platinum group metal exports in the first two months of this year, said Swiss bank UBS in a report this week.
However, the conflict in the Middle East could have an impact on both future PGM supply as well as automotive demand. The dominator is the duration of the conflict, the bank said. If prolonged, the war could weigh on mining inflation and, on the demand side, increase electric vehicles as consumers opt for fuel efficiency.
“A 20% month-on-month increase in fuel and diesel prices implies about 80 basis points of additional inflation and a meaningful, albeit manageable, drag on disposable income if short-lived,” said Steve Friedman, the bank’s precious metals analyst in a note on April 9.
A drawn-out conflict in the Middle East would result in meaningful diesel cost hikes that would have a knock-on effect in logistics and power generation for South African miners.
“In particular, reliance on diesel for mining logistics, coal trucking to Eskom and peaking power generation raises the risk that what begins as a margin squeeze could evolve into a supply-side constraint via higher load shedding and export disruption,” said Friedman.
“As such, duration is key with near-term effects largely inflationary, but prolonged fuel tightness could translate into mining volume risk and potential supply anxiety,” he said.
In the US energy costs surged by 10.9% in March, according to the US labour department. Overall inflation hit 3.3% in March, the highest rate in almost two years. It rose by 0.9% between February and March, the highest monthly gain since June 2022 during the peak of the post-pandemic inflation crisis, reports say.
The Straits of Hormuz, over which Iran has a stranglehold, could be reopened within two months, according to comments attributed to Kevin Hassett, the director of the US National Economic Council. The oil price remained elevated despite a ceasefire owing to concerns it might not prevail, even amid talks between Iran and the US planned for the weekend.
In terms of exports, platinum sales increased 18% year-on-year with all three metals (palladium and rhodium) showing sharp rebound in flows to China and solid European demand, said UBS.
About 27% of South African mineral exports last year were in PGMs, just shading coal which was the second highest export, according to Minerals Council data. The PGM sector accounts for a third of all mining employment in the country.
PGMs posted major improvements in price last year, platinum especially. On a 12-month basis, the metal is 131% higher despite a softening post the US/Israel attack on Iran this month. The metal gains boosted PGM company cash generation and resulted in a dividend windfall with Valterra Platinum and Impala Platinum unveiling special payouts.
