As we head into a new decade, platinum group metals (PGMs) will continue to be a vital part of managing carbon emissions globally. This was demonstrated most clearly to me during a recent layover in Beijing. Looking out across the tarmac, it was impossible to see clearly beyond 500 yards. I was shocked at just how bad the air quality was. After asking around, I was informed that locals considered the day to be bright, sunny and clear.
To me, seeing the emissions-related smog in that emerging economy means short- and long-term demand for PGMs will far outweigh the readily available supply, especially considering that both China and India (two of the world’s most populated countries) have only begun to regulate carbon dioxide (CO2) emissions in recent years. Despite reports and forecasts of slowing western economies, the fact that China and India have set particularly aggressive emissions management targets will drive ongoing increased demand for PGMs.
The demand drivers in India and China as these countries go from nearly no emissions standards to those approaching standards applied in Europe and North America should offset any decline in demand that is to come from slowing western economies. So far, strong demand has had considerable upward momentum on PGMs prices.
Most notably, palladium pricing consistently broke records over the last year. At the beginning of December 2018, palladium was selling for $1,200 per ounce. As of December 2019, pricing for palladium was more than $1,800 per ounce. In its May 2019 “PGM Market Report,” Johnson Matthey estimated an 809,000-ounce net demand deficit for palladium in 2019.
It remains to be seen where the market will take palladium prices in 2020, but we reasonably can assume that with stricter emissions standards in highly populated developing countries and without any predicted forecast of increased supply, palladium will continue to sell at a premium.
Platinum pricing, on the other hand, has remained tightly range bound with the height of the market in recent months at $984 per ounce and the low end at $783 per ounce.
Some analysts are predicting increased demand and, therefore, increased pricing for platinum as some automotive manufacturers look for ways to increase their loadings of platinum to reduce the use of palladium in their diesel autocatalysts, but substitution in gasoline applications is more challenging, according to Johnson Matthey.
Regardless of the possible changes in PGM loadings, replacing palladium with more platinum would take many years to accomplish as manufacturers would need to retool their operations and supply arrangements. Additionally, the costs associated with these redesigns and transitions could negate the savings associated with using platinum instead of palladium at today’s prices, particularly if platinum prices exceed those of palladium in coming years. (Platinum originally was used in all catalytic converters for decades until the 2000s, when automakers transitioned to take advantage of the comparatively lower price of palladium at that time.)
Rhodium, not to be outdone by palladium, has increased even more dramatically in value over the last 12 months, despite Johnson Matthey’s forecast for a total net demand surplus of 44,000 ounces for 2019. December 2018 saw pricing of rhodium at $2,300 per ounce, while December 2019 pricing was close to $6,000 per ounce.
Although rhodium is not necessary in diesel engines, it is necessary for catalytic converters in gasoline engines. From this observer’s viewpoint, new gasoline engine automotive emissions regulations being implemented by China and India within the next two years also are driving rhodium pricing.
For the most part, over the last decade, PGMs have been consistently short on supply for many reasons that include mining strikes, power interruptions and political trade sanctions. The simple fact is that the capacity of the world’s mining operations alone cannot meet or sustain global demand for PGMs. This leaves a great deal of room for recycling to help meet demand.
Autocatalyst recycling is the second largest contributor to the world’s supply of PGMs. Using Johnson Matthey’s supply-and-demand figures for the last six years, autocatalyst recycling has contributed on average 23 percent of the world’s PGMs supply. Recycling of jewelry and electrical sources brings recycled PGMs’ contribution to world supply to just slightly more than 25 percent.
While recycling PGMs, especially autocatalysts, can be complex and in some cases financially risky for buyers without extensive knowledge of the industry, recycling remains a far more cost-efficient method for delivering PGMs.
Mine exploration, digging, blasting and transporting require a great deal of financial and physical resources. Collecting spent autocatalysts, while presenting challenges on the buying side, really just means making sure catalytic converters from end-of-life vehicles are being harvested properly and sent to recycling facilities and not to shredders.
Once mined or recycled materials are harvested, they are treated in basically the same way: They need to be crushed, sampled, smelted and chemically separated to achieve pure metal that is ready for sale in the marketplace.
While treatment of both materials is similar, 1 pound of oar-rich rock contains roughly 18.5 parts per million of palladium, and 1 pound of autocatalyst contains 1,850 parts per million of palladium. Therefore, creating the same yield of palladium requires processing 1,000 times more rock than autocatalysts. Similar comparisons, though not as divergent, can be made for platinum and rhodium.
As long as the world continues to depend on fossil-fuel vehicles and carbon emissions standards are increased, the outlook for PGMs is bright.
With this stark contrast in yield, recycling will continue to play a significant role in meeting worldwide PGMs demand.
For those of us involved in any aspect of the recycling of autocatalysts in 2020, even more importance could be placed on recycling in the future. With words like, “steelmageddon,” or a price-crushing steel glut, being tossed around, smart auto recyclers increasingly will be looking at the value of autocatalysts in end-of-life vehicles to keep cash flowing.
As long as the world continues to depend on fossil-fuel vehicles and carbon emissions standards are increased, the outlook for PGMs is bright. Hopefully, for the sake of the planet and the people living in emerging economies such as China and India, carbon emissions standards will continue to rise and be enforced. In the coming years, I anticipate passing though Beijing again and hope to see bluer skies.
On the recycling side of the supply equation, the same can be said. If trends continue, 2020 could see recycling’s contribution to PGMs supply reaching closer to 30 percent globally.
If your recycling business is not already involved with autocatalyst recycling, you might want to look at how to carve out your piece of the pie while demand is still growing.