PGM Market to Remain Tight Until Mid-Decade Due to Rising Demand and Primary Supply Constraints: Report

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(Kitco News) – According to Metals Focus, the platinum group metals (PGM) market is expected to remain strong in the near to medium term as a recovery in vehicle production, stringent emissions legislation and rising emissions Primary supply constraints are keeping PGM markets tight, despite looming economic challenges.

Later, the consultancy said the shift to electrification and improvements in primary and secondary supply will offset growth in demand from the hydrogen economy.

“The largest single driver of PGM markets continues to be auto catalyst demand. By this year, auto catalyst demand will account for 82% of total palladium demand, dwarfed by 90% for rhodium. Platinum , which has a more diverse range of end uses, only seeing 41% of its demand used in autocatalysis, with jewellery, chemicals and then glass making up most of the rest,” the report’s authors noted.

Metals Focus said that looking at the sector with the highest demand for PGM, in the short term, chip shortages remain the key issue, adding that shortages are the single biggest cause of reduced auto production this year, followed by others. supply chain issues and COVID. blockades, especially in China.

The consultancy noted that, combined, these issues account for almost 7.5 million fewer vehicles produced overall in 2022.

“As these issues subside further over the next two years, ICE production is expected to increase further. Having been a supply-constrained market for the past two years, attention will need to shift to declining demand for new cars as a potential constraint,” he said.

While there is an element of pent-up demand, high fuel prices, higher financing costs (as interest rates rise), lower real disposable incomes, and concerns about an impending recession will discourage new car purchases. , all of which will weigh on the demand for PGM and their respective prices.

Metals Focus noted that another, more existential, threat to PGM demand for automotive catalysts is electrification: the shift from internal combustion engine (ICE) to electric vehicles (EV). Electric vehicles, which account for about one in twelve car sales this year, will increase considerably in the coming years.

“This growing market share eats away at the gasoline (and diesel) monopoly, limiting their production and, in the long run, reducing the total amount of PGM required by the industry. For the time being, however, ICE vehicle production is expected to grow,” the consultancy said.

In addition to this, stricter global emissions legislation standards will also benefit the demand for PGM car catalysts, namely Euro 7, China 6b and EPA 27/CARB 24 for key markets, but also numerous upgrading standards in markets emerging, for example, PROCONVE L-8 in Brazil. .

In addition to the demand for automotive catalysts, recycling will also be a key driver of PGM market balances. In addition to slightly higher overall volumes, the increasing availability of higher PGM content catalysts returning to the refining pipeline is the main reason for the growth, Metals Focus added.

“This is particularly detrimental to the price of palladium as it has historically seen a substantial increase in loadings and will therefore see the biggest gains in recycling. To put palladium growth into perspective, by 2027, we expect automotive palladium scrap to contribute about a third of total supply, up from a quarter in 2022.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has gone to great lengths to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage arising from the use of this publication.

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