25/05/23
EU defence spending to support PGM demand
London, 23 May (Argus) — 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." By
Maeve Flaherty Send comments and request more information at
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