Sibanye flags downturn in palladium price in coming years

World number one platinum group metals (PGMs) mine-to-market supplier Sibanye-Stillwater is upbeat about pricing and demand for most of the metals it mines, but sounded a cautionary note on palladium.

Sibanye — which has PGM mines in SA, Zimbabwe and the US — grew into the world’s largest source of the metals with four rapid-fire transactions in five years, reaping the benefits of buying at the bottom of the price cycle and harvesting strong cash flows as prices for these metals surge.

The six metals making up PGMs are all found in the same reefs and are mined together, making it impossible for companies to extract just one or two, such as rhodium — the most expensive of the group — and palladium to benefit from high prices.

Sibanye is bullish on the prices of platinum and rhodium, which are used in making autocatalysts and antipollution devices in petrol and diesel engines, but it is more cautious on the outlook for palladium, which is also used to make these exhaust devices.

Due to the persistent deficit of palladium for use in petrol-engine autocatalysts, compounded by flooding of mines owned by Russia’s Norilsk Nickel, and PGM processing difficulties at Anglo American Platinum in 2020, there is a growing trend to partially substitute the metal with platinum.

This substitution would lead to demand for platinum in petrol autocatalysts growing to 200,000oz this year and to between 1.5-million and 1.7-million ounces by 2025, said Sibanye CFO Charl Keyter during an S&P Global Ratings SA in Focus virtual conference on Wednesday.

The use of platinum in hydrogen fuel cells, one of the green-energy solutions, will add demand of a further 400,000oz by 2025, Keyter said.

SA is the world’s largest source of PGMs, dominating the supply of platinum and rhodium. Russia is a major source of palladium.

“We are quite bullish on platinum. The opposite is true for palladium,” Keyter said, noting the substitution dynamic and Norilsk Nickel ramping up production.

Sibanye anticipates an 800,000oz deficit in the palladium market disappearing by 2024, bringing prices down.

Tough journey

The rhodium market, which has a deficit of about 10,000oz a year, could balloon to a shortfall of 180,000oz by 2025.

Sibanye is embarking on a “tough journey” to reduce its reliance on fossil fuel-based electricity, primarily from SA’s power monopoly Eskom, which uses coal-fired power plants.

Mining companies are under pressure from investors, funds, communities, governments and environmentalists to clean up and become as environmentally friendly as possible. There is a dearth of funding for thermal coal mines.

Sibanye uses 700MW of electricity daily and is targeting a “50% step down in a very short space of time” in its first phase of switching to renewable sources of energy, Keyter said.

This would come through a combination of solar, wind and other sources of electricity, he said.

In SA, companies are now able to generate 100MW of embedded power.

In the US, Sibanye has one of the world’s largest recycling operations of autocatalysts.

“This is a very environmentally friendly way of producing PGMs. It emits six times less tonnes of carbon dioxide, 63 times less water and generates 90 times less rock waste than conventional mining operations,” Keyter said.

“That’s another business we’d like to build on,” he said.

seccombea@businesslive.co.za