Johnson Matthey: PGM markets remain tight as demand recovers from COVID-19 impacts

The phase-in of China 6 and Euro 6d legislation boosted loadings of palladium and rhodium on gasoline autocatalysts, although demand was impacted by sharply lower gasoline vehicle output. With mine supply down, both markets remained in significant deficit in 2020, lifting prices to record levels.

Rhodium has seen extraordinary price movements over the last two years, from below US$3000 in January 2019 to a new all-time high of over US$21000 in January 2021. This reflects low market liquidity, a fundamental supply deficit, and relatively inelastic demand. Only the glass sector is able to flex its rhodium usage in the short term, by varying the rhodium content of platinum-rhodium alloys used in glassmaking equipment. In 2020, very high prices led to a steep fall in rhodium demand from the glass sector, to levels not seen since the early 1990s.

Alison Cowley, Principal Analyst at Johnson Matthey, commented: “Rhodium has unique catalytic properties, which makes it hard to replace in key applications in the autocatalyst and chemical sectors. Meanwhile, global supply is highly concentrated in South Africa, where the UG2 reef has unusually high rhodium grades compared with other sources of PGM. Rhodium supplies were seriously affected by disruption at South African mining and processing operations in 2020, exacerbating shortages of this rare and critical metal.”

PGM supply and demand should recover towards pre-pandemic levels during 2021, as Covid-19 disruption eases. South African supplies will be augmented by the refining of a backlog that accumulated during processing plant outages in 2020. Autocatalyst recycling is also set to rebound, although platinum volumes will be constrained by limited capacity for treating diesel particulate filter scrap. Automotive PGM demand is forecast to show double digit growth, reflecting a recovery in light vehicle production and the implementation of China VI legislation enforcing the use of PGM catalysts on heavy Chinese trucks. Industrial demand is forecast to remain robust.

High palladium and rhodium prices are stimulating thrifting and substitution programmes at many automakers. Some automakers have already adopted platinum containing catalysts on gasoline cars, mainly in the cooler ‘underfloor’ position where PGM loadings are comparatively light. In 2021, Johnson Matthey expects some additional use of platinum containing formulations in the hotter ‘close coupled’ location, close to the engine, where PGM loadings are higher. However, the overall impact on PGM demand will remain limited.

With supply and demand moving in tandem, PGM market fundamentals should be little changed in 2021. The palladium and rhodium markets are expected to remain in deficit, while the platinum market balance will depend on the behaviour of jewellery consumers and, above all, investors. If platinum investment falls significantly below 2019−2020 levels, the market could move back into balance, or even into surplus.

Rupen Raithatha, Market Research Director at Johnson Matthey, commented: “Chinese platinum jewellery demand slipped to a 20-year low of under 1 million oz in 2020. However, in recent months there have been some glimpses of improvement, as retail outlets respond to high gold prices by stocking more platinum jewellery. In the investment sector, platinum holdings have grown by over 2 million oz in the past 2 years. There may be potential for further buying, in response to platinum’s large discount to gold, and the prospect of additional use in gasoline autocatalysts and fuel cells.”

Read the article online at: https://www.worldfertilizer.com/special-reports/10022021/johnson-matthey-pgm-markets-remain-tight-as-demand-recovers-from-covid-19-impacts/