Modern Mining April 2022

COMMODITIES OUTLOOK

An expected sharp increase in demand alongside slow supply growth should push the platinum mar ket into deficit in the medium term and the metal is expected to remain in short supply into the longer term. This should support higher platinum prices and allow South African PGM miners to continue to have healthy margins as platinum accounts for more than 50% of domestic mined PGM metals. South African miners should obtain an additional boost from the expected increase in demand for minor PGM metals, particularly iridium & ruthenium. Iridium has the potential to be the next rhodium and become a main contributor to PGM revenues because of its use in proton exchange membrane electrolysers which, if coupled with renewables can be used to make green hydrogen. Iridium is pro duced in smaller quantities compared to rhodium and any future surge in demand can lead prices to become super-charged. Ruthenium is used in fuel cells and is also expected to benefit strongly from the development of the hydrogen economy. South Africa should gain from these trends in particular, as the country’s UG2 ores contain at least double the grades of iridium and ruthenium compared to other ores mined around the world. In summary, the recent sharp increases in PGM prices and high profit margins experienced by South African miners are likely a start of a golden decade with platinum, iridium and ruthenium leading the charge. The prices of these three metals have great upside potential due to expected future demand growth from the development of the hydrogen economy coupled with limited scope for significant increases in supply. 

new production, with African Rainbow Minerals planning to restart the Bokoni mine once acquisition from Amplats is complete. Wesizwe and Ivanhoe also aim to start up new operations within the next three years. However, this should largely be offset by depletion of resources at some of the old mines. Outside of South Africa project delays persist, in Zimbabwe due to struggles with securing financing, in North America due to the lack of easily acces sible resources and in Russia because of sanctions. Supply from Russia is likely to be disrupted to some extent in the short term due to sanctions, helping to keep PGM prices elevated as Russia is the second largest global PGM producer accounting for about 40% of palladium and 10% of platinum and rhodium. The consequences of Russia’s conflict with Ukraine are expected to linger even after the war, which should lead to a preference of South African produc tion over that of Russian. Looking to the longer term: The development of the green hydrogen economy is expected to pick up significantly from the middle of the decade as plans announced by various governments over the past three years are realised and as the costs of manu facturing ‘green hydrogen‘ (which is produced using renewables with zero carbon emissions) reach cost parity with hydrogen produced from natural gas. This should support higher platinum prices through 2030. Russia’s invasion of Ukraine has led the EU to reconsider its dependence on Russian natural gas and it has announced plans to more than triple planned green hydrogen use to 20 million tonnes by 2030. Given that the idea is to cut off imports of Russian natural gas eventually, the target should be revised up in the future.

Sharp increases in PGM prices are likely a start of a golden decade with platinum, iridium and ruthenium leading the charge.

20  MODERN MINING  April 2022