Over the past five years, the prices of platinum group metals (PGMs) have exhibited significant volatility, with dramatic surges and steep declines. Initially, the market saw substantial increases, driven primarily by rising palladium and rhodium prices, which were fuelled by robust demand in automotive catalysts. However, this upward trajectory reversed sharply in the last 18 months as the PGM market experienced notable price declines.
Recent discussions about slowing demand for battery electric vehicles (BEVs) have led to hopes about improved PGM prices. However, we believe these hopes are misplaced. We believe the real issue affecting PGM demand and prices is China’s increasing share of the internal combustion engine (ICE) market.
Chinese automakers are rapidly expanding their presence in both domestic and global ICE vehicle markets. We believe the loadings in these vehicles – the amount of metal used in emission control systems – is significantly less compared to Western counterparts, some as much as 50% less. This reduced PGM consumption per vehicle means that even as BEV demand is slowing, the overall demand for PGMs is still being eroded by the switch of consumer preference to Chinese ICE vehicles.
To address this trend, we believe PGM producers need to implement supply cuts. Without adjusting production levels, the market could remain oversupplied, preventing price increases despite slowing BEV trends. Managing supply effectively is crucial for stabilising PGM prices in this evolving landscape.
In summary, while BEV demand trends are important, the impact of China’s low-PGM ICE vehicles on global PGM demand is more significant. This factor explains why PGM prices haven’t risen despite slowing BEV adoption and highlights the need for strategic supply adjustments by producers.
