Gold Digger: Lock up your catalytic convertor, PGM demand is about to go through the roof
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Platinum group metals (PGMs) — platinum, palladium, rhodium, iridium, ruthenium and osmium — are highly valued for their wide range of industrial, medical, and electronic applications.
The biggest demand sector for PGMs is ‘auto catalysts’ in car exhausts which reduce polluting emissions in ICE and hybrid vehicles.
These auto catalysts, or catalytic convertors, account for 40% and 80% of annual platinum and palladium production, respectively.
Last year, the theft of catalytic converters from car exhausts escalated as the price of platinum group metals (PGMs) hit record highs.
Stolen converters were selling for between $US50 and $US1,600 on the black market. It was getting so bad some car owners were taking matters into their own hands.
Platinum currently sells for $US1,035/oz, which is chump change next to palladium ($US1,982) and rhodium ($US15,650/oz).
These prices are well down on all-time highs hit mid 2021, as the global semiconductor shortage forced car makers slash more than 11 million light vehicles from production plans when comparing Q4 2021 to Q4 2020.
In September, German chemicals firm Heraeus said the loss of 7mn light vehicles equates to “a reduction in demand of almost 1mn oz palladium and over 100,000oz of rhodium”.
In 2022, Metals Focus expects Total PGM demand to grow 11%, breaching 12.8Moz. That’s a record high.
“This is 1.2Moz more than 2021 and 200koz higher than pre-pandemic levels, despite expectations that vehicle numbers will still be lower than in 2019,” it says.
This demand growth will be driven by two key factors: a 12.2% year-on-year growth in car production, and tighter emissions legislation in major markets.
Tighter emissions standards = more PGMs in your catalytic convertor. Or something like that.
Turning to the individual metals, platinum will lead the charge with demand growing 20% in 2022.
“With platinum still trading at a meaningful discount to palladium, we will continue to see the deployment of tri-metal catalyst technology, which contains an increased share of platinum,” Metals Focus says.
“Platinum demand in China will also be supported by tightening emissions legislation for heavy duty and offroad vehicles.”
Palladium demand is expected to increase by almost 650koz or 8% y/y in 2022.
Rhodium autocatalyst demand will be returning to all-time highs in 2022. The longer-term outlook is also rosy.
“… the metal is unparalleled at NOx abatement,” Metals Focus says.
“As NOx emission limits across emerging markets continue to converge to European and US standards, higher rhodium loadings are needed, and this is also expected to contribute to demand growth for this metal.”
Gold miners went wild this week as prices hit US$1842/oz on Thursday, the highest level in two months.
In fact, the entire precious metals complex made big gains:
Palladium +6% pic.twitter.com/zxjNBg1nH3
— Peter ⚒ Spina | Gold & Silver Maximalist (@goldseek) January 19, 2022
Gold is slowly getting its groove back as Treasury yields continue to edge lower from recent highs, says OANDA senior market analyst Edward Moya.
“A big wild card for gold is what will happen with Russia-Ukraine tensions…the risks are growing and a small-scale attack could happen,” he says.
“Geopolitical risks and surging global inflation should keep on providing gold underlying support going forward.
“Gold’s next upside target includes the $1880 level, followed by the psychological $1,900 level.”
Here’s how ASX-listed precious metals stocks are performing:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.
ZAGs share price exploded this week thanks to a $3m private placement with Yandal Investments, a company owned and controlled by prominent West Australian prospector Mark Creasy.
Creasy is a well-known investor with a knack of picking winners.
ZAG says proceeds from the private placement will be used to underpin the company’s ongoing drilling programs across multiple exploration targets at its gold-rich Kalgoorlie projects.
Another goldie dipping a leg into the lucrative lithium exploration game, BNR surged before going into trading halt to finalise an announcement in relation to an exploration update.
Either we have a leaky boat or punters have confused BNR with red hot AI stock Brainchip (ASX:BRN), which is our favourite theory.
After seven months of drilling (~35,000m) RXL has increased its total resource at the ‘Younami’ project (70% RXL, 30% VMC) by a whopping 1.34Moz to 3Moz.
Discovery costs come it at an ultra-low $7/oz – an exceptional result, RXL says.
The bulk of the new gold is from the high grade ‘Deeps’ target, which now has resource of 2.195Moz grading 6.89g/t.
There are more upgrades to come, the company says, with some drilling from the last few months of 2021 still to be incorporated in the overall resource.
“We took the decision to provide an interim updated resource estimate given the very long assay turnaround times being experienced of up to 14 weeks in some cases,” RXL MD Alex Passmore says.
“Youanmi mine feasibility studies continue with early mine planning results feeding back into targeted infill drilling areas for continued conversion of inferred material into indicated categories.”
“We also continue to work on grass roots exploration activities in areas outside the immediate Youanmi mine area with the intent of making new discoveries in the region.”