The GraveYard Shift

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Platinum price direction hinges on key sector, says Johnson Matthey
Michael McCrae
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Kitco chiming in on the JM Pgm market report February 2021

PDF

https://matthey.com/-/media/files/pgm-market-report/pgm-market-report-feb-21-english.pdf
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Michael McCrae Thursday February 11, 2021 17:08


Platinum group metals giant Johnson Matthey said that supply and demand for PGM should recover towards pre-pandemic levels in 2021.

Johnson Matthey released its PGM Market Report yesterday.

“With supply and demand moving in tandem, market fundamentals should be little changed in 2021. We expect the palladium and rhodium markets to remain in deficit; for platinum, the direction of the market balance will depend on the behaviour of jewellery consumers and, above all, investors,” wrote the report’s authors.

South Africa is set to recover from COVID-19 disruptions. The country is a giant in the PGM space. Johnson Matthey notes that platinum and palladium production from the Bushveld Igneous Complex in South Afica represents approximately 75% and 40% of annual global production respectively.

"South African supplies will be augmented by the refining of a backlog of semi-processed pgm that accumulated following outages at Anglo American Platinum’s converter plant last year," writes the authors.

A recovering auto sector and ever-tightening regulations should favor industrial demand.

"[Automotive] PGM demand is set to rise by approximately 13%, reflecting a strong recovery in light vehicle production, and the implementation of China VI legislation enforcing the use of pgm catalysts on heavy duty diesel trucks. Industrial demand should remain robust, with pgm purchasing by chemical manufacturers set to reach record highs."

Palladium and rhodium have been on a tear due to their superior performance as a catalyst compared to platinum. Automakers have been experimenting with subsitution, but results are mixed. The rollout of tri-metal catalyst--a hree-way catalyst containing platinum, palladium and rhodium--technology is subject to "...significant technical and commercial uncertainties, and there will probably be large regional variations in uptake."

"Individual automakers appear to be taking very different approaches, with some aggressively pursuing substitution, while others are more risk-averse, or prefer to focus on thrifting the overall pgm content of their catalysts. The potential gains from substitution will vary between models and between

regions; the commercial incentives for substitution are perhaps greatest in North America, where vehicle size and catalyst loadings are typically much higher than the global average."

The authors expect palladium and rhodium to remain in deficit. Platinum demand depends upon on how well jewellery demand picks up.

"The direction of the market balance will depend on the behaviour of jewellery consumers and, above all, investors. There were some glimpses

of improvement in the Chinese jewellery market in the second half of 2020, but it is not yet clear whether this can be sustained. In the investment sector, platinum holdings have grown by over 2 million oz in the past two years. However, there may be potential for further buying, in response to platinum’s large discount to gold."
By Michael McCrae

https://www.kitco.com/news/2021-02-11/Whither-platinum-It-hinges-on-jewellry-says-Johnson-Matthey.html