Hydrogen-related platinum demand ‘to grow substantially’ in medium term

Latest World Platinum Investment Council (WPIC) data identifies a strong link between platinum and the hydrogen economy.

Trevor Raymond, CEO of the WPIC, said, “While hydrogen-related platinum demand is relatively small, it is expected to grow substantially in the medium term; as hydrogen demand becomes meaningful platinum could become a proxy for investors looking for exposure to hydrogen.

“An emergent new end source of demand for a commodity is a relatively rare occurrence and somewhat unique to platinum at this point in time, which only strengthens the investment case for platinum, particularly in a deficit market.”

A platinum deficit of 556 koz is forecast in 2023, as strong demand growth outstrips constrained supply.

Industrial demand for platinum is expected to be an area of stand-out strength this year, up 12% year-on-year to 2,505 koz (+262 koz), and just 26 koz below the level in 2021, the strongest year on record.

This strong demand growth will be driven by the construction of new LCD capacity installations in Japan and from China’s project pipeline as the country’s COVID-19 restrictions ease. Within the glass industry, platinum demand will increase by 55% to 737 koz, offsetting modest declines forecast in the chemical (-2%), petroleum (-4%) and electronics (-6%) sectors.

Raymond said although power supply risks and operational challenges are included in forecast mining supply for 2023, a worsening of electricity supply shortages in major producer South Africa or sanctions-related operating challenges in Russia present downside risks to supply.

“In contrast, although demand forecasts include the negative impact of inflation and lower global economic growth, their downside is well protected,” he said.

Total supply was down in both Q4’22 (-18% year-on-year to 1,739 koz) and full year 2022 (-12% to 7,227 koz), as prevailing headwinds in both mining and recycling supply severely curtailed output.

Edward Sterck, Director of Research, said PEM electrolysers are likely to be the main demand driver in the short term, ahead of rising demand for fuel cell electric vehicles and the hydrogen economy establishing itself. “Effectively, in the next 10 to 12 years, hydrogen could become the biggest driver of platinum demand.”

In research published last August, WPIC estimates that PEM electrolysers operating on renewable energy could generate between 9Mt-29Mt of green hydrogen per year by 2030, dependent on the PEM portion (31%-96%) of all installations.

It calculates that this range of hydrogen production displacing a combination of natural gas and internal combustion engine vehicles with FCEVs would result in cumulative CO2 savings of between 0.24-0.63 Gt.

At the lower end of this range, this equates to 1% of the savings needed to meet the Paris Agreement’s targets of limiting warming to 1.5°C, while at the top end of the range, it equates to 11% of the reductions needed to limit warming to 2°C.

Electrolyser cost savings are likely to come from economies of scale and production volumes, added Sterck, and on the issue of reconciling supply with demand, he said, “Geologically there is no shortage of platinum, it’s more a question of are the producers going to be incentivised to invest in terms of more production in future, and that, given how much is concentrated in South Africa and Russia, is a difficult call.”

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