Platinum, palladium, rhodium fabrication demand to rise in 2021: CPM Group

Global fabrication demand for platinum, palladium, and rhodium should rise this year on the back of strong commercial vehicle sales and overall economic improvement following last year's coronavirus disruptions, New York-based CPM Group analysts said July 13.

All three metals are used in automobile catalytic converters to control greenhouse gas emissions.

Platinum fabrication demand is expected to grow to about 6.9 million oz in 2021 from just over 6 million oz in 2020, which was down 13% from 2019 levels because of weak auto and jewelry demand, vice president of research Rohit Savant said in a presentation to introduce the firm's Platinum Group Metals Yearbook 2021.

Jewelry and automotive demand account for nearly 80% of annual platinum demand.

Platinum demand from the auto sector, the largest end-user, fell 15% from 2019 levels to 2.9 million oz in 2020 because of weak demand for commercial vehicles, and weak diesel vehicle demand in Europe and India, Savant said.

Auto demand this year is expected to rise to 3.2 million oz, above 2020 levels but still below 2019 levels.

"We expect platinum demand from the auto sector to benefit from a recovery in commercial vehicle sales this year, tighter emissions standards, and also the gradual shift you're seeing in the reintroduction of platinum in gasoline autocatalyst," Savant said.

But he noted that platinum demand faces headwinds with the ongoing decline in diesel passenger vehicle production and the halting of overall production because of a shortage of microchips.

Platinum supply, comprising secondary scrap supply and mine output, is expected to grow to about 6.8 million oz from about 6.4 million oz in 2020, Savant said.

But Savant noted that platinum mine supply has been falling since 2006 mostly on various disruptions in South Africa ― the world's largest producer ― while scrap supply has been declining since 2015 because of weaker platinum prices and reduced platinum loadings in autocatalysts. Those two trends are expected to continue, which could raise prices in the medium term, he added.

Platinum ended 2020 with a surplus of 218,000 oz, but will likely end 2021 with a surplus of about 100,000 oz.

Palladium demand to rise 8%

Palladium fabrication demand is expected to grow to 9.2 million in 2021 from about 8.5 million oz in 2020 on the economic recovery in the automotive and electronics sectors, Savant said.

Automotive demand is expected to grow to rise to about 6 million oz on improving passenger vehicle sales, especially larger vehicles in the US, from about 5.5 million oz in 2020.

But a shrinking gasoline vehicle market in Europe and the ongoing microchip shortage will provide headwinds, he said.

"The shortage of chips, which is hampering auto production, is something that we think could be an ongoing headwind during the year, and you also have the shrinking of the gasoline market in Europe, which we think will be a headwind for palladium demand, and the increasing use of platinum in gasoline autocatalysts will be a headwind.

Palladium supply from scrap and mine output is expected to grow to about 9.2 million oz in 2021 from about 8.9 million oz in 2020, primarily on growth in scrap supply that will offset falling mine output, Savant said

The global palladium market is expected to revert to a small deficit from a surplus of about 484,000 oz in 2020, although the surplus was absorbed by institutional and retail investors, he added.

"There is clearly a lot of palladium demand from investors, which is what is helping keep palladium prices higher, and which also explains why despite a large amount of inventory available in the market, prices are still at record levels," Savant said.

Rhodium demand to rise 8%

Rhodium fabrication demand is expected to grow to 952,000 oz from about 879,000 oz in 2020, which itself was 17% from 2019 levels, Savant said.

Demand from the auto sector, which accounts for about 85% of annual rhodium demand, is expected to reach just over 800,000 oz in 2021 from about 725,000 oz in 2020.

Rhodium supply is expected to rise to nearly 990,000 oz in 2021 from 905,000 oz in 2020 because of increases in mine output and scrap supply. South African mines account for nearly 80% of annual mine output, he added.

However, rhodium is expected to remain in a surplus in 2021 of about 25,000 oz, similar to the surplus in 2020.

"Given the importance of rhodium in autocatalysts, and the heavy reliance on rhodium mine supply from South Africa, this results in any surplus metal being quickly absorbed," he said.

"We do think the rhodium market will remain tight; we do think prices will cool off a little bit from where they were earlier this year," Savant said.