Higher defence spending by Europe and its allies in response to changing US foreign policy will support platinum group metal (PGM) demand in the coming years.
Increased defence spending is expected to boost demand across specialty metals as the EU attempts to meet the short-term needs of Ukraine's military and to strengthen Europe's defence in the longer term.
The European Commission's ReArm Europe plan aims to drive €800bn in defence investment.
Higher defence spending is unlikely to result in an immediate increase in demand for specialty metals — orders for the EU plan are expected to translate into increased demand no earlier than the second quarter of 2026.
PGMs are key components in aircraft engines, with platinum and rhodium used for temperature sensing and platinum for protective plating on blades.
Platinum and iridium are also present in missile nose cones. "In the case of PGMs, it is often the heat resistance that is very important. In some rocket systems, you need extremely high-performing metals to guarantee that they work," a senior market analyst said.
PGMs also have crucial avionics and electronics applications. Ruthenium is used for chip resistors, while palladium is used for capacitors and other components. Rhodium and iridium are also utilised for reed switches.
Lasers and optical systems, such as night-vision goggles, also use PGMs. Platinum-rhodium alloys are used in the production of technical glass, while iridium complexes are key for organic light-emitting diodes.
And platinum is used in fuel cells for non-nuclear air-independent submarines and fuel cells for silent, long-duration field power and drones.
Price no barrier for defence consumption
Defence is market where the high price of certain PGMs compared with base metal substitutes does not weigh on demand.
"PGMs are used because they provide certain characteristics and properties that lend themselves to defence applications. You would use PGMs rather than base metal alternatives because you are looking for that safety and longevity — price isn't an issue," Johnson Matthey market research director Rupen Riathatha told Argus in an interview.
Raithatha cited electronics as a clear example of differing approaches to metal consumption. In the 1990s, producers of multilayer ceramic capacitors (MLCCs) for consumer markets largely substituted nickel for palladium because of nickel's lower cost.
But the defence sector has continued to use palladium metal electrode MLCCs because of their better performance and reliability.
PGM supply to stay constrained
But supply constraints might be a challenge for the defence sector.
In December 2024, Nato included platinum on a list of 12 critical raw materials essential for advanced defence systems.
"The availability and secure supply of these materials are vital to maintaining Nato's technological edge and operational readiness. Disruptions in their supply could impact the production of essential defence equipment," Nato said.
Many countries have platinum on their critical mineral list because of the concentration of production in South Africa and Russia.
In the near term, recognition of PGMs' importance to defence is unlikely to impact market dynamics, as low PGM prices continue to limit output.
The platinum market is entering its third consecutive year of deficit, according to the World Platinum Investment Council. The deficit is expected to deepen to 966,000oz in 2025.
Supply in 2025 is forecast at its lowest in five years, down by 4pc from 2024 to 6,999,000oz.
South African mines, which supply much of the world's PGMs, have struggled in recent years with industrial action, high energy costs and low PGM basket prices. The challenging price landscape resulted in significant restructuring and production cuts in 2024.
Platinum mine supply continues to face downside risks in 2025, WPIC said.
But the PGM market has a large recycling circuit that is often not taken into account in critical mineral discussions, which often overemphasise primary mine supply.
"There is a wide network of PGM flows that do not require panic stockpiling of metals," the senior analyst said, referring to the recycling circuit. "There is sufficient production capacity, it is just the economic side that needs to come up."
