SA poised to benefit from PGMs growth

Article written by Nadine Ramdass at Mining Weekly.

South Africa is strategically poised to benefit from the growth trajectory of the platinum-group metals (PGMs) sector, as it holds about 80% of the world’s PGM resources.

The country demonstrates a unique competitive advantage, as a result of the increasing demand for platinum in hydrogen fuel cell powered vehicles, despite various challenges affecting the sector, says specialist mining services provider Ukwazi business development director, Spencer Eckstein.

In 2021, the PGMs sector rated higher in terms of foreign exchange sales, compared to those of coal or gold, as the South African economy showed moderate signs of growth of about 1% to 1.5% in 2022, amid the global economy moving towards pre-COVID levels in some sectors.

A steep rise in platinum demand is also expected because of its use in autocatalytic converters.

Eckstein says critical areas of growth for PGMs are evident in rhodium and palladium sales, and the application of PGMs in hydrogen fuel-cell technologies.

Aligned with the increasing demand for PGMs is the South African government’s intent to implement a Platinum Valley project, which will serve as a new industrial cluster for the country.

Higher Education, Science and Innovation Minister Blade Nzimande has also said that work on the country’s new Hydrogen Valley Corridor project has started.

“The hope is to replicate the success of hydrogen valleys in other markets, where they have been used to promote emission reduction and clean emerging technologies,” Eckstein adds.

The project is expected to  result in extensive social and economic advantages for the country, with 14 000 to 30 000 direct and indirect jobs potentially being created yearly by 2030.

There will possibly also be a contribution of about R60.2-billion to R123-billion to the gross domestic product by 2050, Eckstein points out.

However, he notes that there is uncertainty in the market, owing to fears regarding a global recession, inflation, interest rate hikes, the Russia-Ukraine conflict and the varying degrees of lockdown in China, which could keep prices lower for longer.

For example, the economic sanctions placed on Russia has resulted in the focus shifting to global palladium supply and pricing.

With Russia’s Norilsk-Talnakh deposits boasting 46% of palladium-containing deposits, and the Bushveld Igneous Complex, in South Africa, containing 39% of palladium-containing deposits, any disruptions to these critical supplies could have a significant effect on pricing globally.

There are also short-term supply constraints because of delays caused by a lack of smelter and concentrator capacity, as well as risks associated with PGM production in Zimbabwe, with demand-side factors – such as recycling and low or slow autocatalyst demand for motor vehicles – affecting the industry, Eckstein explains.

Further, stricter legislation and regulatory frameworks, as well as regional and global agreements pertaining to carbon emissions reductions, will significantly impact on the future of PGMs demand.

To reach the full potential of the PGMs industry ­– particularly in relation to the hydrogen and fuel cell industry – it is critical that concerns, issues and challenges are identified and effectively resolved  in collaboration with industry and policymakers.

“Any legislative and trade uncertainty, including barriers to implementation, must be addressed,” adds Eckstein.

He cites news agency Bloomberg, which reported in May 2022 that an investment of $14-billion would be required if South Africa were to establish a feasible and sustainable green hydrogen industry.

As such, substantial, viable international investment will need to be prioritised, as well as effective measures, to boost investor confidence.

Article originally published on Mining Weekly.