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InDABA ReVIeW

Market

circumspect

on PGM

price surge

utgoing Anglo American Platinum Ltd
O(Amplats) chief executive Chris Grif-
fiths has called for calm on rising PGM
prices. Chris Griffiths
PGM producers are salivating with pal- changes. In his eyes, the key mistake
ladium and rhodium prices, in particular, made by the industry was not reacting
surging in recent months on the back of sooner. shrinking for the third consecutive year in
a global supply shortage and increased “I think the platinum industry needed to 2020. However, the impact may be cush-
demand from China. respond to the increase in demand; you’ll ioned by the fact that China produces only
Palladium soared past $US2,500/oz in recall at that time demand was increasing a quarter of the world’s auto-catalysts.”
January to be valued higher than gold – by 5% per annum and it grew like that for Speaking alongside Griffiths during a
a fact pointed out by Ivanhoe Mines Ltd 20 years,” he said. panel session at Mining Indaba, Nedbank
co-chairman Robert Friedland during his “Of course, the guys that extrapolated CIB mining analyst Arnold van Graan at-
keynote presentation to Mining Indaba that for another 20 years might have been tributed the global PGM supply shortage
last month. a bit ambitious, but I think three key things to there not being enough metal in the
In what is likely to be his last public ap- happened to that structural change in de- market.
pearance at the helm of Anglo American’s mand; first of all, platinum was substituted However, he warned many investors
platinum division after more than seven out of the auto-cats and more palladium were still hesitant around the sector, par-
years in the role, Griffiths warned the was used; the second structural change ticularly in South Africa, which accounts
PGM industry not to repeat the mistakes was rhodium was substituted out and the for 80% of the world’s PGM production.
of a decade ago. third structural change was the increase “A lot of shareholders and investors we
“Certainly, for the next 10 years you’ve in recycling which went from 500,000oz speak to are still nervous about the PGM
got to watch structural changes and mega to 2 moz. market…and that’s why we’re not seeing
trends effecting supply, but in this case, I “Those were big structural changes to these multiples running up progressively,”
think PGMs are going to be a winner in demand and what the industry was slow van Graan said.
structural changes,” Griffiths said. to react. What the industry should have “I think there is more upside in the equi-
“The world needs us to cut emissions done is [react] much, much quicker to ties over a long-term period, but I am just
and therefore we are increasing loadings cutting that supply because at that stage concerned we’ve done a bit too much too
on every auto-catalyst and it’s using more about half the industry was loss-making, quickly. I’m not saying it’s going to fall in
palladium and more rhodium. Those met- yet the industry just kept on pumping out a heap, but the market tends to get over-
als can’t be substituted out, but what they more metals; they made the problem heated.
can do is substitute with other PGMs and worse.” “Fast money comes in fast and it goes
the answer to that is platinum.” In its latest research note at the time of out even quicker, so just be wary of that.”
Preceeding Mining Indaba, Griffiths an- print, ANZ said the demand for palladium Public Investment Corporation mining
nounced his intention to step down from was expected to “hold up” despite ongo- and resources portfolio manager Mdu
the top job at Amplats to pursue other ing concerns the coronavirus epidemic Bhulose also urged the industry to exer-
business interests. It was subsequently will further soften an automotive sector cise caution.
confirmed that Natascha Viljoen – cur- still in the midst of a two-year slowdown “When commodity prices rally in a short
rently group head of processing for Anglo in global vehicle sales. space of time, you start seeing manage-
American – would take over his role from “China’s auto production is likely to ment getting adventurous with money,”
next month. shrink by 17% in Q1 2020 due to shut- Bhulose said. “The question is, ‘is it the
Griffiths is widely credited with steer- downs,” the ANZ research note said. “As right time to build?’ It must be measured
ing Amplats through one of the division’s China is the integral part of auto supply so that value is not destroyed.”
toughest periods after the PGM mar- chains, global auto production will also be
ket collapsed due to multiple structural impacted. We see global auto production – Michael Washbourne

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