Platinum will remain shiny for the long term

The country’s platinum production should not be dropping at a time of shrinking deficits

Earlier this week, Anglo American announced it would separate from Anglo American Platinum (Amplat), from its De Beers diamond business and from its coal projects to focus on copper, iron ore and crop nutrients.

Letting go of diamonds and coal makes sense. I’m 30-something and my generation is proposing marriage with lab-grown diamonds, given they are more environmentally friendly and conflict-free, and the world is rapidly moving away from coal amid the global clean energy transition. But platinum?

OK, I admit I’m biased. As I was lamenting the future of Anglo’s decision about Amplats, the CEO of a mining major and dear friend reminded me it was the “commodity of my youth”. Fair assessment. My career started in the platinum belt and I later wrote a PhD on SA’s platinum sector at Cambridge.

But the proposed restructuring would see the company let go of the platinum mines that have been a core part of its business. It’s short-sighted in almost every way. The fundamentals of the platinum group metal (PGM) market are strong. This is evidenced by the evolution of the sector in the past couple years. It’s particularly relevant this week, given the platinum deficit for 2024 was revised upwards just a few days ago.

Let’s discuss the short-sighted nature of this decision. I started writing a PhD on platinum in 2016 — and in many ways the sector felt doomed. Price shock testing showed that prices would be a secular decline, which means rather than being cyclical and going up and down, they would largely be a downward trend. This was largely driven by falling demand for catalytic converters for emissions control in conventional internal combustion engines.

So as platinum prices came down, producers scaled back production. In 2024, production is expected to be at its lowest point since the first year of the Covid-19 pandemic.

But then we realised that platinum, palladium and rhodium were vital for electric vehicles and hydrogen fuel cell technology. Demand began increasing. In 2023, there was a deficit of 850,000oz and in 2024 there’s a forecasted deficit of 476,000oz. I admit I didn’t see that coming. I’m not sure many others did either.

The US has designated platinum as a critical mineral. But what does that mean? “Critical minerals” is a very sexy term these days. Criticality is dynamic rather than static. It’s a product of two factors: the amount of future demand and the likelihood of supply disruptions.

Platinum is a telltale example of the dynamic nature of critical minerals. It was hardly viewed as critical five years ago. Today, both platinum and iridium are in the red zone for criticality by the US department of energy.

It looks like things will get worse. Platinum production is expected to fall in SA, while in Russia it will hit a multi-decade low because of Western sanctions. These sanctions are a good reason SA production should not be dropping.

Preventing a BHP takeover of Anglo is important — I get it. But dropping the platinum business is not the best way to go about it. I’m sure other companies will pick up some of these assets. But Amplats has been one of the most stable presences in global platinum mining. Anglo has been around for over a century, after all.

Mining is a long-term game, and it’s my hope that big firms and the industry at large take a long-term strategic approach. But it’s evident that’s not the case, both in the platinum sector and in mining writ large. Financing, exploration and production have dipped against a backdrop of low commodity prices.

I’ll lament the loss of Amplats for a while. The reality is that platinum is not only the commodity of my youth, it’s also a critical commodity for the medium and long term. The US really only has one proper platinum mine, so SA has a central role to play in meeting global demand. But it is hard to see that happening right now.