Platinum prices may be on the verge of recovery as carmakers start making moves to replace platinum with palladium. The dollar price of platinum is up 48% in 2019.
That is the view of Chris Griffith, the outgoing chief executive of Anglo American platinum, who conservatively predicts that it will take another 18 to 24 months for platinum to be widely used in the catalytic sector.
“Manufacturers are doing this for the first time,” Griffith said in the company’s annual results report. “it’s the first sign of substitution.” Last year Amplats generated a record of $100bn in revenues, 58 percent of which came from sales of palladium and rhodium gold.
He said the platinum-palladium replacement had not been adopted quickly because carmakers faced unique pressures of their own, including from society on issues such as climate change.
The bigger problem for carmakers is the cost of palladium and rhodium, which rose 73 percent in dollar terms last year. Only now, as palladium prices have risen and the cost of cars has risen from $70 to $200 a vehicle, have manufacturers started to worry about continued shortages.
Griffith said that in addition to the impact of global warming, there was the Volkswagen scandal in 2015 when the German company’s cars produced more toxic fumes on the road than in the lab because of “tampering” with testing standards. There is enormous pressure to regain the trust of the car-buying market by developing practical driving tests.
“The original equipment manufacturers are starting to think about this, but it is not imminent,” he said. The market will have an answer in the next 18 months to two years, but if palladium shortages persist, not just price differences, the substitution could accelerate. It’s not a cause for panic because there are alternative metals out there.”
Palladium and rhodium gold prices have been rising due to a lack of supply but asked if the market was prompting producers to start producing more of the metal, Griffith said the company would suspend production until it increased production.
The company will not initiate the project at current prices, and there is also an oversupply of 600,000 to 800,000 ounces of platinum a year, excluding the 1.1m ounces, it absorbed through ETFs last year.
“The solution for the prototype equipment maker is based on the existing platinum capacity,” Griffith said. The worst thing that can happen to us is rushing into a project without doing enough research. We can’t just make investment plans at current prices, but throughout the price cycle.”
“If we invest only at current prices, you could be disappointed in the next 10 years,” he says.
Amplats is also interested in investing in fringe industries that can continue to grow. Its new development at Mogalakwena, a primary mine, is producing between 300,000 and 500,000 ounces, with no significant capital investment and room for further growth. “So we don’t abandon our principles and rush forward,” Griffith said.
Griffith said the company had no plans to develop the Twickenham mine on its own because it had better options. Twickenham also needed a new concentrator, something the company was not interested in investing in. For now, Amplats will develop mine plans for the property and then hopes to push ahead with sales in the second half of the fiscal year 2020.