Palladium outshining platinum offering much needed boost for miners

LONDON — Petrol and hybrid cars are increasingly targeted in the United Kingdom by thieves, who are stripping catalytic converters off cars for their valuable metals. BMW, Audi and VWs are being targeted. And it is palladium they are after for scrap metal as the price of the metal has increased by 42% since August last year. This is good news for South African platinum mines as “the rally in palladium is partially offsetting the slump in platinum prices to near a decade low.” It is not only demand for palladium which is helping the South African producers, “the rand is providing the biggest boost.” If there is another drop in the value of the rand, it “may allow Implats and Lonmin to postpone some of their planned job cuts.” – Linda van Tilburg

By Felix Njini

(Bloomberg) – Record palladium prices and a weaker rand are lifting the gloom enveloping South Africa’s platinum industry.

For South African producers, the rally in palladium is partially offsetting the slump in platinum prices to near a decade low. Combined with a decline in the rand, which lowers costs for miners selling metal for dollars, that’s extending a lifeline to companies such as Impala Platinum Holdings Ltd., Sibanye Gold Ltd. and Lonmin Plc.

“While the outlook for South Africa’s platinum industry is uncertain, we do not believe it is as bleak as perceived, at least for some producers,” said Carsten Menke, a commodity strategist at Julius Baer Group Ltd.

The price of palladium, used mainly in pollution-control devices in gasoline vehicles, has almost tripled over the past three years, including a 42% gain since August. Rhodium, another byproduct of platinum mining that’s used in cars and the chemical sector, has climbed fourfold since July 2016. Smaller quantities of the other platinum-group metals – iridium, ruthenium and osmium – are also extracted from South African mines.

Palladium

Implats rose the most in more than two months in Johannesburg trading on Monday after the world’s No. 2 platinum producer rebounded to a first-half profit from a year-earlier loss. The turnaround was driven by higher platinum-group metals prices, the company said.

“We have customers asking to buy all our palladium and rhodium,” Johan Theron, a spokesman for Implats, said before the results were released. That demand doesn’t fully compensate for losses from mines that produce mainly platinum, he said, and the company still plans to cut 13,000 jobs at its giant Rustenburg complex.

Anglo American Platinum Ltd. said it expects 2018 profit to as much as double, boosted by a 13% increase in the basket price of PGMs. The world’s biggest platinum miner is also expanding its Mogalakwena mine that is highly geared toward palladium.

Palladium contribution

The importance of palladium varies between different mines and producers – accounting for about a quarter of Lonmin’s platinum-group metals output and about half that of Sibanye, following its purchase of US palladium producer Stillwater Mining.

The surge in palladium is helping Sibanye pay down debt it accumulated during an acquisition spree, said spokesman James Wellsted. The basket price for the company’s output of all PGMs surged 19% to R15,700 ($1,155) an ounce in 2018.

High palladium prices as the market remains in deficit until around 2024 may eventually encourage automakers to switch to platinum, which is currently largely confined to diesel cars. That would provide a further boost to South African producers, said Morgan Stanley analysts including Christopher Nicholson.

Currency boost

While the rand has surged this year, it’s still down almost 10% against the dollar over the past 12 months. Should the currency weaken again, that may allow Implats and Lonmin to postpone some of their planned job cuts, said Rene Hochreiter, an analyst at Noah Capital Markets Ltd.

“The rand saves mining companies, as it has always done in the past,” Hochreiter said. “Palladium and rhodium have been helping, but the rand is providing the biggest boost.”

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