Platinum mining companies on the JSE are facing tough times as they make significant cuts to their planned capital and stay-in-business expenditure. The four largest platinum miners have slashed nearly R30bn in spending, reflecting a grim outlook for the metal’s price as well as its palladium and rhodium co-products.
The industry has been hit hard by plummeting prices, with palladium down 40% and rhodium 62% lower year on year. This has led to a 4.2% decline in the average PGM basket price in January and February. Despite the forecasted supply deficits for platinum, palladium, and rhodium, trading activity remains uncertain.
Uncertainty in demand is also looming, with concerns about automotive sales impacting the market. Elevated interest rates and a semiconductor shortage have hampered consumer spending on new cars, affecting investment demand for platinum. Additionally, the rise of electric vehicles poses a challenge to traditional internal combustion engine cars, further adding to the market’s uncertainty.
As mining companies grapple with these challenges, there is a growing focus on managing balance sheets and reducing costs. However, the road ahead remains unclear, with potential production cuts and restructuring on the horizon. The market consensus on palladium heading for a supply surplus may be based on misconceptions, as the potential for an increase in recycling supply could change the outlook for the metal.
Despite the current downturn, there is optimism that the market will eventually rebound. With the potential for a shift in demand patterns and supply dynamics, the PGM industry is poised for a period of volatility and change. Investors are advised to stay informed and cautious as the market navigates through these uncertain times.
