PGM prices hitting new record highs

The platinum group metal (PGM) price rally shows no sign of abating, with several products hitting new highs this week, buoyed by strong demand outlooks and persisting concerns about supply tightness.

Prices for minimum 99.5pc platinum have jumped by $165/troy ounce (ozt) to $1,295/ozt yesterday — their highest since September 2014, according to UK specialty chemicals producer Johnson Matthey. Rhodium has clawed back its late-January losses, with yesterday's New York close pushing minimum 99.9pc grade above the $22,000/ozt threshold to $22,200/ozt — the highest level rhodium has ever reached.

Elsewhere, the palladium market remains choppy, but Johnson Matthey prices for minimum 99.95pc grade have risen sharply since 3 February, to $2,428/ozt from $2,265/ozt — a significant recovery since slumping to around $1,613/ozt in March 2020 as Covid-19 spread and lockdown restrictions were imposed around the world.

Meanwhile, iridium and ruthenium have both surged in the past two months — a particularly striking jump for iridium, which hovered in a band of $1,480-1,745/ozt during most of 2020 but has now jumped to a record high of $4,400/ozt du Rotterdam for minimum 99.9pc grade. Prices for 99.9pc grade ruthenium are at a record high of $317.50/ozt fob US warehouse — an ascent that has been building for some time but is in stark contrast to the $40-63/ozt range that prices kept to through most of 2016-2017.

The latest increases come as no surprise to most market participants and onlookers, albeit some have been wondering if products like rhodium are due for a downward correction at some point. The long-term demand fundamentals are strong, with PGM consumption closely aligned with the global green energy transition and imposition of stricter emissions standards — particularly in the automotive sector.

Johnson Matthey expects 2021 automotive demand for PGMs to increase by 13pc year on year to just over 13mn oz. Demand for industrial applications is likely to remain robust, and demand from chemical manufacturers is poised to reach a "new all-time peak" in 2021, Johnson Matthey said.

The PGM industry is also restabilising after a year of Covid-19 disruptions, particularly in South Africa, which is by far the dominant producer of certain PGMs, including platinum and rhodium. The country's PGM producers have been pushing to ramp output back up after last year's lockdowns, with most forced to fully suspend operations for a brief period amid last year's first wave of restrictions. Johnson Matthey estimates that PGM shipments from South Africa fell by 27pc last year, while mined production fell by 17pc.

Last year's temporary "loss" of some PGM producers affected spot price volatility and approaches to purchasing, market participants said. With fewer sellers able to offer material, liquidity fell and price volatility became more exaggerated with each trade. As a result, some PGM buyers opted to reduce their exposure to the spot market, locking in their usual monthly volumes under a fixed monthly price rather than navigate the volatility of unusually choppy daily movements, a market participant said.

South Africa's latest lockdown — announced on 11 January — has been less restrictive for the mining industry than the one imposed last year, some producers told Argus. And it appears to be easing, with the government announcing the reopening of 20 land border crossings four days ago.

But despite many producers getting their operations back on track some PGMs, including palladium and rhodium, are expected to remain in short supply this year, signalling potential for prices to remain firm and perhaps rise further. In addition, products such as iridium, rhodium and ruthenium are extracted as co-products of platinum and palladium, meaning their supply has been particularly impacted by some equipment-related disruptions to South Africa's PGM refining capacity since last year. Recycling activity has also slowed due to Covid restrictions, impacting a more marginal but still significant secondary supply source for rhodium.

By Ellie Saklatvala