JOHANNESBURG (miningweekly.com) – Shifting investment priorities and geopolitical uncertainty continue to shape the outlook for commodities, with platinum group metals (PGMs) facing unique pressures, Nedbank CIB markets research head Arnold van Graan reported on Thursday, March 20, when he described the mood in the PGMs sector as "remaining subdued".

On the one hand, supply is tightening and changing demand dynamics could push prices higher, and on the other hand, investor sentiment remains lacklustre, shaped more by short-term volatility than by the market's long-term trajectory, Van Graan outlined, while noting that this disconnect was evident in discussions at Mining Week in Cape Town, where industry leaders debated the risks and opportunities facing PGMs.

The divergence between short-term sentiment and long-term fundamentals is seen as being at the core of the PGM price conundrum.

Supply constraints are becoming more evident, particularly in South Africa, where ageing mines and years of underinvestment are limiting future production growth.

While no large-scale closures have been announced, rising costs and operational hurdles could soon drive further restructuring.

Markets tend to respond sharply when supply cuts become unavoidable, and history suggests that these turnarounds can take a long time to materialise but can be market-moving when they realise.

HYBRID VEHICLES

On the demand side, the hype around battery electric vehicles (BEVs) rapidly replacing internal combustion engine vehicles has softened.

While BEV growth continues, adoption is slowing owing to cost pressures, infrastructure challenges, and consumer hesitation.

Meanwhile, hybrid vehicles, which still require PGMs, are gaining market share and becoming a bigger part of the market mix.

Revised forecasts suggest that hybrid technology will remain essential to the transition to cleaner mobility, ensuring continued PGM demand.

With the platinum demand outlook evolving, there is a shift away from palladium, largely owing to geopolitical concerns over Russian supply.

Western automakers are reducing their reliance on Russian-sourced palladium, making platinum the preferred alternative.

While platinum’s historical price discount to palladium was a key driver of this shift, concerns over supply security are now taking precedence, reinforcing platinum’s position in long-term supply chains.

RECYCLING

Recycling, once a stable secondary supply source, has become less predictable. High used-car prices and reduced scrappage rates have constrained the availability of recycled PGMs.

Unlike past cycles, where price rallies quickly led to increased recycling, the pipeline of recyclable material has been depleted.

Rebuilding these supply chains requires time and capital, both of which are scarce in the current higher-interest-rate environment, making recycling a less effective market stabiliser.

Russian PGMs continue to flow into global markets despite sanctions, with supply routes shifting towards China and other non-Western-aligned countries.

Although these shifts have created short-term imbalances, history suggests that markets always find equilibrium.

Meanwhile, potential trade policy shifts in the US could introduce further volatility and uncertainty to a complex market.

HYDROGEN AND FUEL CELLS

Hydrogen and fuel cell technology remain long-term demand drivers, but their immediate impact is limited.

While industrial applications for PGMs are expanding, they are not yet large enough to offset declines in traditional autocatalyst consumption.

For now, the sale of vehicles that contain PGMs remains a primary demand driver, and any shifts in automotive trends should continue to have a material impact on PGM prices.

Investor hesitation continues to define this cycle. Despite clear signs of tightening supply and shifting demand patterns, capital remains slow to return to the sector.

However, past cycles suggest that market sentiment can shift quickly. When PGM markets turn, price movements tend to be sharp, and those who hesitate to wade in early often miss a big portion of the initial rally.

“The PGM market is in transition. The long-term fundamentals remain strong, but the market has yet to reflect these shifts. For those willing to look beyond short-term uncertainty, the potential remains considerable,” Van Graan pointed out in a release to Mining Weekly.