Global Fluctuations In Precious Metal Prices

Global Fluctuations In Precious Metal Prices

September 07, 2020 | Metals & Minerals

Precious metals include platinum, palladium, rhodium, ruthenium and rhenium along with gold and silver. 80% of primary demand for platinum, palladium and rhodium came from the auto-catalyst and chemical industries, with the remaining 20% coming from the medical, dental, electrical and jewelry industries. Precious metals, as their name suggests, are rare and have a limited supply globally, with mines in South Africa supplying 73% of platinum, 37%,  of palladium and 83% of rhodium (whose name comes from Rhodesia, the old name for South Africa), while Russia provided 12% of platinum, 42% of palladium and 9% of the global supply rhodium in 2019. These metals witness price fluctuations across geographies due to the availability of supply and other deterrents during mining operations.

Platinum: An Oversupplied Market With New Uses

Market oversupply pushed platinum prices to $864 per oz. on average in 2019. Prices are expected to increase by 15% to 20% on account of promising prospects for platinum substituting palladium in auto-catalysts. However, original equipment manufacturers are yet unable to adopt changes in catalyst formulations that would have a meaningful impact on the demand and ultimately the price of platinum. Although overall industrial demand for platinum fell by 8% in 2019, sales of platinum to Chinese chemical producers hit a new peak last year. Petrochemical complexes in China incorporated paraxylene units that require large volumes of platinum, coupled with an expansion in propylene capacity, which use the propane dehydrogenation process that also involves large volumes of platinum.

Palladium: Expect Demand and Prices to Increase

The global supply of palladium was impacted by power cuts imposed by Eskom, South Africa’s electricity public utility company, near the end of 2019. Furnace maintenance activities in Russian mining enterprise, Nornickel also curtailed palladium availability. However, greater yield from North American mines would offset this imbalance and global primary supply is expected to be flat. Stricter emission standards such as Euro 6d and China 6a would drive the demand for palladium. In spite of a decline in light-vehicle sales in major automobile markets, higher loadings of platinum-group metals in auto-catalysts are expected to maintain overall demand, thus pushing prices up.

Ruthenium: New Technologies May Lead to Lowered Demand

Ruthenium garners major demand from the electronics industry as it is used in coating components of microwave assisted recorders in hard disk drives. At the end of 2019 Seagate presented an alternative technology that involved heat-assisted magnetic recording, which does not use Ruthenium and can significantly impact the global demand for the precious metal. Prolonged power cuts in South Africa, which supplies nearly 90% of the world’s ruthenium, can lead to a decline in supply. Ruthenium prices are expected to drop due to a likely shift towards affordable heat-assisted magnetic recording components.

Rhodium: Power Cuts in South Africa Lead to Higher Prices   

Glass fiber fabricators typically switch rhodium with platinum content in the alloy when the price ratio between the metals exceeds 4:1 (namely, rhodium becomes four times as expensive as platinum). Since mid-2019, this threshold has been nearly 6:1, driving down industrial demand. Even though stricter emission regulations were laid down for automobiles in China and Europe and car sales have been affected in 2020, an increase in the loading content of Rhodium in auto-catalysts has offset this. South African rhodium accounts for nearly 85% of global supply and with expected power cuts, this can negatively impact supply and push up prices substantially.

Conclusion

Fluctuations in primary supply of precious metals are encouraging recovery of precious metals from secondary sources such as used electronics, dental fillings, jewelry, and spent automotive and industrial catalysts. The market is estimated to be $180 billion, 33% of consists of industrial and automotive catalysts. Obtaining metals from secondary sources would ensure more reliable pricing for users and would facilitate more availability of precious metals.

 

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John Piatek

Vice President, Consulting

John has over 15 years of strategy consulting experience managing several large-scale engagements with leading global clients.

At GEP, John is responsible for partnering with leading CPG and retail enterprises on strategy, supply chain and management initiatives. John is also the Chair of GEP’s Thought Leadership Council.

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