Vai dal Barbieri: Platinum Group Metals and the real value in the decarbonization challenge

In today's landscape of increasing focus on decarbonization, Platinum Group Metals (PGMs) play a crucial role due to their unique characteristics such as durability, high temperature resistance, and filtering properties. Although platinum and palladium are often mentioned in financial reports, the PGM group includes six elements: platinum, palladium, ruthenium, rhodium, iridium, and osmium. Each of these metals has specific properties that make them indispensable for a variety of highly specialized industrial applications.

Ruthenium, for example, finds use in the production of resistors and electrical contacts, as well as in electrochemical processes for the production of chlorine, ammonia, and acetic acid. Rhodium, one of the most expensive and rare metals (at about twice the price of gold), is used in applications requiring extremely high heat resistance, such as crucibles, thermocouples, and the coating of optical fibers and optical mirrors. Iridium, with a price similar to rhodium, and the seventh highest melting point of all metals, is an essential component in jet engines, space thrusters, and other components that must withstand extreme temperatures and pressures. Osmium, on the other hand, is used in the production of very hard alloys for precision instruments and electrical contacts.

Among PGMs, palladium and platinum are particularly relevant in the automotive industry. Palladium is crucial in catalytic converters in gasoline engines, and is essential for reducing harmful gas emissions. In electronics, its excellent conductivity and corrosion resistance make it ideal for electrical contacts, soldering, and components such as capacitors and connectors. In jewelry, it is used to create durable, lustrous alloys such as white gold. Platinum, on the other hand, is used in catalytic converters in diesel engines because of its high conductivity and resistance to oxidation. It is also widely used in surgical instruments and medical devices, such as pacemakers, because of its biocompatibility. In jewelry, it is valued for its durability and luster.

On the supply side, most of these metals come from geopolitically unstable regions such as Africa and Russia. In particular, South Africa and Zimbabwe are the largest global producers, supplying about 80 percent of mined platinum, 45 percent of palladium, and about 90 percent of rhodium. In 2020, South Africa accounted for 81 percent of global iridium production and 87 percent of ruthenium production. These metals are therefore subject to high geopolitical risks, given that 80% of global supply comes from high-risk areas. Russia, on the other hand, plays a significant role, contributing more than 10 percent of the global supply of rhodium and platinum, and 40 percent of that of palladium. However, due to the conflict in Ukraine, many Russian products have been restricted, and PGM metals could be the next target in the financial war between the West and Russia.

Europe is in a critical situation with regard to stocks of these materials, with particularly low levels, so low as to require U.S. intervention to supply the continent. Despite the persistence of this situation, there is no desire to expand production. The situation is worrying both in America and, more importantly, in Europe, where companies are increasingly dependent on U.S. imports to meet domestic demand.

On the demand side, the automotive sector continues to be a strong driver, with platinum and palladium projected to peak in 2025 at 93 tons. Despite increasing sales of electric vehicles, consumer preference for hybrid cars could support demand for these metals, which are needed in catalytic converters and exhaust systems. More cars with internal combustion engines are expected to be sold in emerging economies than electric cars in developed markets over the next decade, so demand for catalytic converters will remain solid.

As for platinum, its application in hydrogen purification, coupled with reduced availability of recycled platinum and growing industrial demand, offers considerable potential for appreciation. However, supply deficits create a need for replenishment that could further affect the market. For 2025, forecasts indicate stable gross demand for platinum, slightly positive for rhodium, and negative for palladium. All three metals show a deficit in 2024 when mining and recycled supply are combined, subtracting demand. There is also a deficit in 2023 for all three metals, with palladium already in deficit by 2022, despite historically high prices. Only 72 percent of the annual demand for platinum can be met by mining supply, while for palladium this percentage drops to 65 percent and for rhodium to 62 percent. In addition, recycling volumes have declined rapidly in recent years, suggesting that recyclable reserves may be nearing depletion.

Some industry experts indicate that many manufacturers have tried to manage material supplies by using only in-stock inventories to avoid market exposure. However, this approach may only postpone a possible price spike in the event of a sudden increase in demand.

In conclusion, although current deficits are not yet reflected in commodity prices, securing a stable supply of these materials is critical to the future of decarbonization and global industry.