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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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How Lower Demand For Steel Boosts Platinum Prices

More signs of major shifts in the platinum sector this week. With press in South Africa reporting that major producer Anglo American is close to a sale of its Union mine in country.

But at the same time as miners are restructuring, a key piece of research suggests there could be better times coming for the embattled platinum sector. Related: Court Decision Could Accelerate Oil And Gas Bankruptcies

That came from platinum experts Johnson Matthey last week. With this group saying that an unlikely factor could be set to give a lift to platinum prices this year.

That’s the steel market. Another sector that’s been seeing major price declines of late — which could mean a lower supply of recycled platinum (and palladium) hitting the market.

Analysts at Johnson Matthey noted that steel prices are actually linked to platinum. Because the majority of recycled platinum supply comes from automobiles — a market where steel prices are also a key part of the economic equation. Related: Oil Prices Steady After Rising 40% in Recent Weeks

That’s because scrapyards look at prices of all automobile components when deciding whether to recycle. The value of platinum contained in old vehicles is important — but so is the value of the automobile’s steel. And with steel prices down, there’s less incentive to recycle vehicles and unlock the platinum group metals contained inside.

As Johnson Matthey’s general manager for market research, Peter Duncan, put it,” The low steel price has stopped cars from entering the scrap profile in the first place, so there is a direct link between the low price and the amount of PGMs recycling.”

The Johnson Matthey report did note that recycling could pick up a little over the coming months — as high scrap inventories force recyclers to get rid of some vehicles. But the group noted that overall recycling levels will remain “very price dependent”. Related: Oil Price Crash Was Not Saudi Arabia’s Fault

If true, this could be an important factor in restricting supply — given that recycling provided 1.725 million ounces of platinum in 2015. And a fall in output from this key sector could add to the already significant deficit the platinum market has been seeing the last few years.

Watch for more numbers from Johnson Matthey and others to see if the downward trend in recycling does materialize as 2016 wears on.

Here’s to junking it

By Dave Forest

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Leave a comment
  • Tan on March 30 2016 said:
    OUNCE??? WHATS WRONG WITH USING KG OR TONNES ... WHO THE HELL UNDERSTANDS "OUNCE" OUTSIDE USA

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