Platinum deficit is likely to persist — analysts

The world’s major platinum producers were confident that autocatalyst recycling and the growth of electric vehicles would not counter the growing deficit in the market, industry leaders said on Tuesday.

Paul Wilson, CEO of the World Platinum Investment Council, said at a panel discussion at the Investing in African Mining Indaba that all credible analysts agreed the platinum market had been in deficit for the past five years and the council believed the deficit would persist into the future.

Production was constrained because of falling capital spending and rising input costs. Any supply response to rising prices would be slow. Steve Phiri, CEO of Royal Bafokeng Platinum, and Chris Griffith, CEO of Anglo American Platinum, agreed that exchange-traded funds represented a long-term removal of platinum from the market, not an easy source of supply as soon as prices rose.

Gerhard Potgieter, acting CEO of Impala Platinum, said that since 2011, mining companies had cut capital spend and about 1-million ounces of unprofitable production had been taken out of the market.

Sibanye Gold CEO Neal Froneman said it was hard to justify spending growth capital in the current environment.

Griffith said if there was a modest increase in demand, deficits would also increase gradually and no price spike would result, which would be better for the industry.

Producers agreed current prices did not incentivise new production but said it was impossible to name a price point at which mothballed production would be resumed.

Potgieter said it was a misconception that platinum from autocatalyst recycling could disrupt the market. The forecast recycling volumes had not materialised because cars lasted longer and low steel prices had been a disincentive.

Phiri doubted that electric vehicles would take a big share of the market away from diesel vehicles, which use platinum in autocatalysts. Electric vehicles were growing rapidly off a low base but would displace petrol, not diesel, vehicles.

Griffith said electrification of the automotive fleet would not displace conventional vehicles.