Platinum group metals (PGMs) mining, refining, and marketing company Implats, which has reported solid production in a low-price environment, is ironically still experiencing strong demand for all major PGMs with the exception of ruthenium.

The group generated half-year earnings before interest, taxes, depreciation and amortisation of R8.4-billion, headline earnings of R3.3-billion, or 365 c per share, and recorded a free cash outflow of R4.8-billion, after funding capital expenditure of R6.8-billion.

“On the demand side, if we were to look at the current requirements from customers, we still see very good demand in terms of all the major metals except for ruthenium,” Implats group executive: refining and marketing Sifiso Sibiya said In response to questions from Engineering News & Mining Weekly during a media briefing.

“In terms of what’s happening with the prices and what’s happening in the market, the overall volume of above-ground stocks and the destocking by several original equipment manufacturers (OEMs) and the Chinese fibreglass manufacturers have affected prices.

“If we look at our market development, on the development front, on the AP Venture side, we’ve seen quite a good uptake from companies that are focusing on the hydrogen economy.

“If we look at the World Platinum Investment Council in terms of investment, we’ve made quite good progress in terms of the net ounces that have been taken by our partners.

“On the jewellery side, Chinese platinum jewellery remains low, as it has been over the last couple of years, and we expect an uptick this year.

“But if we look at the other regions, for example, Japan, India and the US, there’s quite a healthy demand on the jewellery front.

“So, demand-wise, things are very good but prices are not reflecting what we see on the floor,” said Sibiya.

On prices not reflecting the good demand, Implats group executive: corporate relations Johan Theron contended that in his view the demand is being reflected in the price. “I think it does. If we look back two, three years, certainly that deficit, fundamental market balance was reflected in price.

“It’s just important to understand that you’ve got two driving forces, you’ve got the physical supply-demand market, but you also have sentiment – sentiment on the global economy growth rates, investments, where the global growth is heading, and then people are also able to take positions on the paper markets – long, short positions, speculative marketing.

“So, when you see prices turn down from the record highs, then immediately people that are sitting on too much metal or have excess metal start selling that into a lower price to try and lock in as much value as they can, and, of course, they can protect themselves on the futures market by going short or negative, depending on their position.

“What we’ve seen over the last year is massive increases in short positioning, specifically in palladium, and that overhang of a negative sentiment on the market is what is primarily driving prices to what we are experiencing today,” Theron explained.

Discounted Material

Added to that, specifically regarding palladium, over the last 12 months, heavily discounted material has been seen coming from Russia, which created two market prices specifically in the Chinese and in the US markets.

“All those have weighed in heavily on pricing, with prices not following fundamentals,” Sibiya added.

“Two things potentially can reverse it. If we start seeing the interest rate cycle moderating, like we all expect, and global growth in the economy, prospects improve, then sentiment will improve and there will be reaction,” said Theron.

“Equally with the cuts and that on the supply side that we all are effecting, if indeed there is a healthy underlying market, then buyers are going to find it difficult to source metal, and then those short positions on the future markets are going to be squeezed out and then you should see a price response.

“A price turn can happen through sentiment or it can happen through the physical market but both those forces are always in play, not necessarily always in the same direction,” Theron added.

Green Hydrogen

On hydrogen’s potential use of PGMs going forward, Implats executive: corporate affairs Emma Townshend said in response to Engineering News & Mining Weekly that Implats continues to be very encouraged by the news of further developments it is seeing in the hydrogen market.

“There’s positive and growing momentum. I think yesterday Honda announced they are launching a fuel cell electric vehicle (FCEV). You’re starting to see more and more kind of mainstream OEMs announcing lineups of FCEVs, which I think is a big shift in the news flow that we’ve seen over time.

“It’s something that we think is a medium- to longer-term drive of demand. I think it creates positive sentiment. We’re not seeing downgrades to estimates; we’re seeing upgrades, but it does take some time before it becomes a meaningful driver.

“So, at the moment, probably 80 000 oz to 100 000 oz of PGMs uptake in the last 12 months. That moves to closer to half a million ounces towards the end of the decade, and then momentum really starts going in the 2030s, and it’s driven by the downstream and midstream and upstream applications and they are numerous.

“It’s hydrogen but also associated products, so things like ammonia. We’re invested in AP Ventures, which is a private equity fund focused on hydrogen-associated technologies with a bent for PGMs demand,” said Townshend.