Tighter vehicle emission law good news for SA platinum producers

SFA's Beresford Clark says the outlook for platinum is strong given increasing demand from emerging economies. Image: SFA Oxford

SFA‚ an independent group analysing the platinum market‚ forecast the platinum price would average US$1‚400/oz this year with an exchange rate of R10.80 to the dollar.

Europe is a major market for platinum used to make autocatalysts‚ which scrub noxious gases from diesel engines‚ but emerging markets could overtake it as their emission control legislation is raised to European standards‚ Clarke said at the Mining Indaba on Tuesday (4 February).

"The recovery of platinum demand since the onset of the 2008 global financial crisis‚ which lowered consumption of the metal‚ would have been a lot quicker if there had not been substitution of 620‚000oz of the metal with palladium‚ a cheaper sister metal‚" he said.

"The positive news for the long-term future of the platinum market is the huge potential for platinum use in the emerging markets‚" Clarke said.

The construction of diesel engines in these emerging markets in South and Latin America‚ Africa‚ Russia and Asia will soon overtake Europe as a collective. "However‚ most of these vehicles are not legislated to European standards‚ so when they do get there the upside is massive‚" he said.

These emerging markets could add 500‚000oz of new demand by 2020 mostly driven by India. SA produces about 4m ounces of platinum a year.

If legislation on a par with that of Europe was applied to these areas‚ including China's potential‚ then SFA estimated an additional two-million ounces of demand would be added to current levels. "Admittedly‚ it won't arrive overnight and there are technology threats out there‚" Clarke said.

"However‚ it does indicate that if South African producers can just survive the next couple of years‚ do their best to iron out price volatility‚ guarantee security of supply as well as increase productivity levels and manage costs there is a huge captive market on the horizon that will require satisfying in years to come‚" he said.