Platinum group metals retain their sheen – outlook for 2020

Outlook for Platinum Group Metals heading into 2020, Factors affecting supply and demand and the role recycled materials will play in meeting demand.
Published in Recycling Today: Features – Precious Metals Commodity Focus – January 2020

Recycling continues to supply more than one-quarter of platinum group metals’ demand.

 As we head into a new decade the Platinum Group Metals will continue to be a vital part of managing carbon emissions globally. This could not be demonstrated more clearly to me than during a recent flight layover in Beijing, China. Looking out across the tarmac it was impossible to see clearly beyond 500 yards. I was shocked at just how bad the air quality was. After asking around a little I was informed that locals considered the day to be bright, sunny and clear.

To me, seeing the emissions related smog problems in this emerging economy means short and long term demands for PGM’s will far outweigh the readily available supply. Especially considering both China and India (two of the world’s most populated countries) are only coming to terms with regulating CO2 emissions in recent years. Despite doom and gloom reports and forecasts of slowing economies, the fact that China and India have set particularly aggressive emissions management targets will drive ongoing increased demand for PGM’s.

The demand drivers in India and China going from near zero emission standards to those approaching standards applied in Europe and North America should offset any decline in demand coming from slowing western economies. So far, strong demand has had considerable upwards momentum on PGM market pricing.

Most notable, Palladium pricing has consistently broken records in the last calendar year. The beginning of December 2018 PD was selling at $1200/oz as compared to a year later with pricing in excess of $1800. In the spring PGM Market Report, Johnson Matthey estimated a total net demand deficit of -809,000 ounces for 2019. It remains to be seen where the market will take palladium prices, but we can reasonable assume that with stricter emission standards in highly populated developing countries and without any predicted forecast of increased supply, palladium will continue to sell at a premium.

Platinum pricing on the other hand has remained tightly range bound with the height of the market in recent months at $984/oz and the low end at $783/oz. Some are predicting increased demand and therefore; increased pricing as some automotive manufactures are looking into ways to increase loadings of Platinum and reduce Palladium. While this is possible on paper, Palladium thus far remains the better actor as a catalyst. Regardless of findings insinuating possible changes in PGM loadings, switching out PD for more PT would take more than 2 years to accomplish as manufacturers would need to retool and change demand requirements for platinum and palladium.

Rhodium not to be out done by palladium in any way has been even more dramatic with its value increase in the last 12 months, despite Johnson Matthey’s forecast total net demand surplus of 44,000 ounces for 2019. December 2018 saw pricing of Rhodium at $2300/ounce while December 2019 pricing is hovering near the $6000/oz marker. Although RH is not necessary in diesel driven engines it is a necessity for catalytic converters in gasoline engines. From the observer’s viewpoint, pricing of Rhodium is also being driven by new gasoline automotive emissions regulations being implemented by both China and India within the next 2 years.

Recycling’s role in supplying PGM’s

PGM’s for the most part, over the last decade have been consistently short on the supply side. There are a multitude of reasons for this, from mining strikes, power interruptions, political trade sanctions, the list goes on. The simple fact is the capacity of the world’s mining operations alone cannot meet or sustain the global demand for PGM’s. This leaves a lot of room for the recycling of these precious metals.

Autocatalyst recycling by is the second largest contributor to world supply. Using Johnson Matthey’s supply and demand figures for the last 6 years, Autocatalyst recycling has contributed on average +23% of the world’s PGM supply. Other recycling of PGM’s from jewelry and electrical sources would bring recycled PGM’s contribution to world supply to just over +25%.

While recycling PGM’s, especially autocatalyst can be a complex operation and in some cases financially risky for buyers without extensive knowledge of the industry, recycling remains a far more cost-efficient method for delivering PGM supply. With precious metal pricing for the last few years trending up, the risk of purchasing and processing spent autocatalyst has been greatly reduced or at least purchasing mistakes are eased due to the up-trending market.

One crucial factor that must be understood between mining and recycling is that the concentration of precious metals in autocatalyst are considerably higher than those concentrations found in oar bearing rocks pulled from the ground. For example, the average North American ceramic catalytic converter has a concentration of 1850 parts per million of contained palladium. Compare that to oar rich rock coming from the ground at 14 to 18 parts per million. It doesn’t take a Harvard MBA to see where the efficiencies might be.

The efforts of mine exploration, digging, blasting transporting require a lot of financial and physical resources. Collecting spent autocatalyst; while presenting challenges on the buying side, really just means making sure that catalytic converters from end of life vehicles are being harvested properly and sent to recycling facilities, not the shredder. Once both materials are harvested either from the ground or the scrap yard, both materials are treated in basically the same way. They need to be crushed, sampled, smelted and chemically separated to achieve pure metal ready for entry/re-entry into the marketplace. 

While treatment of both materials is similar; the quantity of rock compared to autocatalyst is measurable by the contained precious metals of each. If 1 lbs. of oar rich rock contains roughly 18.5 parts per million of palladium and 1 lbs. of auto-catalyst contains 1850 parts per million of palladium; creating the same yield of palladium will require processing 1000 times more rock. Similar comparisons; but not as widespread, can be drawn with platinum and rhodium.

With this stark contrast in supply production, clearly the role of recycling will continue to play a significant part of meeting worldwide PGM demand. For those of us involved in any aspect of the recycling of autocatalyst in 2020 there could be even more importance placed on this core. With words like, “Steelmageddon,” being tossed around, smart auto recyclers will be increasingly looking at the value of the autocatalyst in end of life vehicles to keep the bankroll flowing.

So, to wrap up this forecast in a nutshell, as long as the world continues to depend on fossil fuel and increased carbon emissions standards for the burning of said fuel – the outlook for PGM’s is full speed ahead, we simply can’t get enough. Hopefully, for the sake of the planet and people living in emerging economies like China and India, carbon emission standards will continue to rise and be enforced. In the coming years I anticipate passing though Beijing again and hope to see bluer skies.

On the recycling side of meeting the demand, the same can be said. If trends continue, 2020 could see recycling’s contribution to PGM supply reaching closer to 30% of global supply. If your recycling business is not already involved with autocatalyst recycling, you may want to look at how to carve out your piece of the pie while the industry demand is still growing.