Our Gold Digger column wraps all the news driving ASX stocks with exposure to precious metals.
PGM demand will remain strong until about 2025, when it will start to fall off a cliff, Metals Focus says.
Why 2025? Because that’s when electrification of transport really kicks up a gear, at the expense of traditional internal combustion engines (ICE), it says.
The largest single driver of the PGM markets remains auto catalyst demand.
Three to seven grams of platinum group metals (PGMs) — mostly platinum, palladium and rhodium – go in every catalytic converter, which sit in your car exhaust to reduce polluting emissions.
Catalytic convertors account for as much as 80% of annual platinum and palladium production, respectively.
In 2022, Metals Focus expects total PGM demand to grow 11%, breaching 12.8Moz. That’s a record high.
“For this year, autocatalyst demand will make up 82% of total palladium demand, eclipsed by 90% for rhodium,” Metals Focus says.
“Platinum, having a more diverse range of end-uses, will only see 41% of its demand used in autocatalysis, with jewellery, chemicals, then glass making up the bulk of the remainder.”
Car production numbers have been severely dented by a well-publicised short of chips; a problem which is hopefully coming to an end.
Metals Focus’ most recent Five-Year PGM forecast reveals that the PGM markets are expected to remain robust over the short to medium term as vehicle production recovery, stringent emissions legislation and growing primary supply constraints keep things tight, despite looming economic challenges.
“In addition to this, stricter global emissions legislation standards will also benefit PGM autocatalyst demand – namely Euro 7, China 6b, and EPA 27/CARB 24 for the key markets, but also numerous improving standards in emerging markets e.g. PROCONVE L-8 in Brazil,” it says.
For the time being ICE vehicle production is expected to grow, it says.
But EVs, accounting for roughly one-in-twelve car sales this year, are set to climb sharply in the coming years.
“This increasing market share eats into gasoline’s (and diesel’s) monopoly, limiting their production and, over the longer-term, reducing the total amount of PGMs required by the industry,” Metals Focus says.
However, Bridge Street Capital analyst Chris Baker believes this isn’t likely to be the immediate problem Metals Focus says it is. The electrification of transport will be a long-term, 50-year structural change.
“I would argue that the change is going to be a lot slower than most would like – we won’t be able to electrify the automotive industry as quickly as we hope… it’s just not possible,” he says.
“We can’t make enough batteries because we haven’t got enough raw materials which means in the shorter term – at least for the next 20 to 30 years – we will continue to see more intense scrutiny regarding internal combustion engines.
“Demand for ICEs will be around for decades, particularly in heavy vehicles and those that need to travel long distances – batteries are not yet up to that task.”
This means a lot more of palladium, platinum, and rhodium, for longer.
I KNOW. We keep saying this, but gold prices appear to be steadying as foreign exchange (forex, or FX) volatility sends the US dollar all over the shop.
Usually, when the USD dollar moves up, gold falls – like it has been doing in recent times — and vice-versa.
“Gold is clearly going to become a safe-haven as the global outlook deteriorates and as Wall Street grows confident that we are nearing the peak with Treasury yields,” OANDA analyst Edward Moya says.
“Gold has massive support at the $US1660 level and if it can stabilize above there, prices could eventually make a move back above the $US1700 level.”
Here’s how ASX-listed precious metals stocks are performing:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.
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September 23, 2022
September 23, 2022
September 23, 2022
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