Precious metals consultancy Metals Focus’ new ‘Platinum Group Metals (PGM) Focus 2024’ report, which offers a comprehensive analysis of the PGM industry, indicates that the rest of the year will be defined by persistent supply constraints, coupled with robust demand, leading to another year of deficits across platinum, palladium and rhodium.

“However, high inventories will [also] weigh on prices,” Metals Focus PGM director Wilma Swarts says.

The yearly report includes historical supply and demand data from 2015 to 2023 and provides a detailed forecast for this year.

The report shows that platinum, palladium and rhodium experienced significant price declines in 2023 despite all three metals being in a deficit.

Platinum saw a short-lived rally following the US banking crisis but faced downward pressure owing to abundant above-ground stocks. Record short positions in the futures market heavily impacted on palladium prices, while rhodium suffered a stark price drop, driven largely by substitution with platinum in Chinese glass manufacturing.

According to the report, automotive demand for PGMs remained resilient last year, bolstered by the easing semiconductor crisis and increased production of light-duty vehicles.

Mine supply struggled amid operational challenges and subdued PGM prices, leading to cost-cutting measures, including mine closures.

Secondary supply also faced challenges, particularly from a decrease in autocatalyst scrap recycling owing to scrapyard hoarding, legislative hurdles and extended vehicle lifespans, Metals Focus reports.

Despite challenging conditions, industrial demand for platinum hit record highs, driven by glass and chemical capacity expansions, while palladium and rhodium faced continued pressure from substitution and thrifting strategies, owing to their historically high prices.

Metals Focus expects platinum prices to remain relatively stable for the rest of this year, averaging at $960/oz. Automotive demand is expected to remain consistent as increased hybrid production offsets electric vehicle (EV) adoption pressures, but industrial demand is forecast to decline by 15% year-on-year owing to the absence of new chemical and glass capacity expansions.

While palladium may see short-term price recoveries owing to its deficit and diminished short selling, its price will generally decline because of the shift to battery-operated EVs and substitution with platinum. Demand will contract but will be outpaced by a decline in supply this year, driven by falling mine production.

Meanwhile, despite a return to net-positive glass demand and a 40% jump in chemical demand owing to acetic acid expansions, significant inventory overhang and weak spot buying will keep rhodium prices range-bound at about $4 750/oz.

“In spite of such healthy supply-demand conditions, institutional investment activity weighed on prices last year. Most notably, palladium Nymex net managed money positions grew from a small (182 000 oz) net short at the start of 2023 to over one-million ounces by September.

“Platinum saw a huge uplift at the start of the year, with South African exchange-traded product holdings almost doubling to their May peak of 897 000 oz, before giving most of it back in the second half of the year. Nymex net managed money positions in the metal oscillated between long and short throughout last year, reinforcing its range-bound conditions,” the report states.

Metals Focus says it expects to see another deficit for all three metals this year, largely owing to persistent supply constraints.

“Trading behaviours that dominated 2023 will continue to play a large role in shaping prices in 2024. We forecast platinum will remain range-bound, with an average price of $960/oz in 2024, down 1% year-on-year,” the report says.

In contrast, Metals Focus expects the palladium price to rise as the impact of the net managed money shorts cannot realistically be repeated and as the metals benefit from the deficit this year. However, as the price has a much lower base than at the outset of 2023, this results in a 23% fall in the yearly average to $1 030/oz.

“As for rhodium, the price is supported by the deficit, but we expect inventory releases to limit the upside. This means the metal remains range-bound, giving it a yearly average of $4 750/oz,” the report states.

“The sharp fall in the PGM basket price is one of the greatest factors shaping the mining industry. 2023 saw a steep decline in palladium and rhodium prices, and platinum stagnating.

“This has created margin pressure for the sector, with around half of South African PGM miners running uneconomically today, causing them to become increasingly reliant on by-products such as iridium and chrome,” Swarts says.

She notes that, as the PGM market faces technological advances and evolving global economic policies, it stands at a significant turning point. Despite steady industrial demand and supply constraints lending support, the increasing prevalence of EVs and economic unpredictability bring formidable challenges.