Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Average prices for platinum, palladium and rhodium are expected to fall this year compared with 2023 despite another year of structural deficit for all the three metals of the group, consultancy Metals Focus said on Monday.
The basket price of the platinum group metals (PGMs), which are chiefly used in vehicle exhausts to neutralise harmful engine emissions, slumped in 2023 due to worries that rising market share of PGMs-free, battery-powered electric vehicles (BEVs) would reduce demand in future.
Demand for the PGMs from the auto sector rose last year as the 2021-2022 chip crisis had run its course, but the pace of BEVs penetration remained the main challenge for the PGMs demand, Metals Focus said in its 104-page report.
BEVs currently account for 14% of auto production, up from 11% at the beginning of 2023, Metals Focus said. This impact has been partly offset by a pickup in hybrid vehicles, which need PGMs. These now have a 22% share of light duty vehicles, up from 18% at the start of 2023.
The competition between the metals inside the group saw a change in 2023 with the slowing substitution of palladium with platinum as the two approached price parity.
“Going forward, we expect substitution will stall,” Metals Focus said.
On the supply side, lower palladium and rhodium prices have squeezed margins, with half of South African mines operating uneconomically on an all-in sustaining cost basis, an industry metric that reflects total expenses, at the end of 2023.
Many miners sought to reduce costs, and this process will keep supply constrained this year causing another year of structural deficit, which in its turn is going to be covered by existing above-ground stocks.
“Trading behaviours that dominated 2023 will continue to play a large role in shaping prices in 2024,” Metals Focus said.
In 2024, Metals Focus expects average prices for platinum to slide by 1% to $960 per troy ounce, for palladium to decline by 23% to $1,030, and for rhodium to fall 28% to $4,750.
| 2023 | 2024 | 23/22 | 24/23 | |
| Supply | ||||
| Mine production: | ||||
| – Platinum | 5,604 | 5,468 | 2% | -2% |
| – Palladium | 6,512 | 6,125 | 0% | -6% |
| – Rhodium | 664 | 670 | -4% | 1% |
| Total supply: | ||||
| – Platinum | 7,161 | 7,111 | -2% | -1% |
| – Palladium | 9,137 | 8,881 | -3% | -3% |
| – Rhodium | 953 | 983 | -5% | 3% |
| Demand | ||||
| Automative: | ||||
| – Platinum | 3,211 | 3,269 | 16% | 2% |
| – Palladium | 8,456 | 8,319 | 7% | -2% |
| – Rhodium | 992 | 969 | 6% | -2% |
| Total demand: | ||||
| – Platinum | 8,028 | 7,687 | 11% | -4% |
| – Palladium | 10,146 | 10,011 | 5% | -1% |
| – Rhodium | 1,058 | 1,161 | 8% | 10% |
| Surplus/deficit | ||||
| – Platinum | -867 | -576 | n/a | -33% |
| – Palladium | -1,009 | -1,130 | 249% | 12% |
| – Rhodium | -104 | -178 | n/a | 70% |
| Average price | ||||
| – Platinum | 965 | 960 | 0% | -1% |
| – Palladium | 1,337 | 1,030 | -37% | -23% |
| – Rhodium | 6,611 | 4,750 | -57% | -28% |
(By Polina Devitt; Editing by Nick Macfie)
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