PGM prices jump following Amplats' ACP Unit B closure: Afriforesight

London — Platinum group metal prices jumped moderately following South African Anglo American Platinum's announcement on Nov. 5 that it had decided to close its Anglo Convertor Plant Unit B at its Waterval smelter complex for a full rebuild, South African research firm Afriforesight's head of precious metals, Pearson Mururi, said in a research note Nov. 6.

"This should be a significant bottleneck to South African PGM output, as the ACP also processes large quantities of 3rd party material," Mururi said. "Waterval's ACP is one of the few plants in South Africa able to convert PGM matte to a final product."

The Johnson Matthey (JM) platinum London base price on Nov. 6 stood at $904/oz, up 1.5% from Nov. 5, the JM palladium base price increased 2.8% day on day to $2,418/oz, while the JM rhodium base price jumped 4.3% day on day to $14,600/oz.

On Oct. 22, the JM rhodium base price hit an all-time high of 14,700/oz. The JM price is for metal in sponge form with minimum purity of 99.9%.

The weekly Platts New York Dealer rhodium price range was assessed a $12,800-$14,500/oz on Nov. 5. The price reflects transactions of rhodium sponge between dealers, refiners/recyclers, investment banks and industrial consumers.

Amplats -- one of the world's largest platinum and platinum group metals producers -- said that the troubled convertor plant, which has been plagued by water leaks, would need to once again close for a full rebuild that will last through 2021.

As a result. Amplats has lowered its refined production and sales guidance for 2020 to 2.5 million PGM ounces, from 3.1-3.3 million oz previously.

Contingency plans in place

Amplats said it had contingency plans in place and will be engaging with customers to minimize any disruption to contractual obligations, with refining only expected to resume when Unit A repairs are completed at the end of 2020.

In February, the company's ACP Unit A experienced an explosion, which forced its closure for repairs.

Mururi said the Amplats' output cuts include significant quantities of 3rd party material that the company would have refined under either toll treatment or concentrate offtake agreements.

"However, these 3rd party volumes should not be entirely lost as some spare capacity exists at other smelter operations," the analyst said.

Mururi also added that he does not expect the entirety of Amplats' guidance downgrade to be felt by the market.

"The reduced production outlook should boost prices until end-2020, but prices should be under pressure in 2021 as supply recovers," he said.

"Amplats' refined production should rise sharply in 2021 with the processing of work-in-progress stockpiles. We expect these stockpiles should rise from the 500,000 oz 3E [platinum, palladium and rhodium] level reported at the end of 2nd quarter to between 960,000 – 1.1 million oz by the end of the year which is about 6% of platinum and rhodium global production in 2019 and 3% of palladium."