25 Feb, 2021

Platinum market may be headed for surplus in 2021, Implats executive says

The platinum market may be headed for a surplus in 2021 on the back of South African supply, Sifiso Sibiya, Impala Platinum Holdings Ltd.'s group executive of refining and marketing, said during a Feb. 25 earnings webcast.

"Recovering South African supply is likely to outpace underlying platinum demand, and in absence of meaningful investment flows, the market will likely revert to surplus," Sibiya said, outlining views of the broader market for platinum group metals.

The platinum, palladium and rhodium markets were in a deficit in 2020, as the pandemic disrupted supply and demand for the metals, Sibiya noted. PGM are commonly used in catalytic converters to remove pollution from exhaust.

Sibiya said Impala Platinum, also known as Implats, expects palladium and rhodium to remain in deficit in the near term. "Resurgent automotive production in excess of sales will underpin the near-term demand recovery in both palladium and rhodium," the executive said.

Implats concluded supply-contract negotiations during the six months ended Dec. 31, 2020, Sibiya said, noting that customers appear to prefer contract buying over reliance on spot markets for the metals. The spot market has "been characterized by poor liquidity and wide bid-offer spreads since the onset of the pandemic," Sibiya said.

Longer term, Sibiya pointed to potential demand from greening economies, which could result in demand emerging from PGM-bearing, hydrogen-powered fuel cells, among other technologies. Still, the executive noted that fuel cells have not yet been a significant demand source for PGM.

"To date, commercial deployment has been slow, and hydrogen's share of the global energy mix remains low," Sibiya said. "Unlocking and developing the hydrogen economy is expected to be a key driver of PGM demand over the course of the next decade."

Implats reported a surge in basic earnings in the first half of its fiscal 2021 to 25.08 billion rand from 3.40 billion South African rand in the prior-year period.