The decline of platinum?

I read in the Business Day that Anglo American Platinum (Amplats, AMS) is "driving fuel cell development in SA to prepare for the decline in the use of platinum", and my first thoughts were that a decline in the use of platinum would hit Southern Africa hard, since 85% of the world's platinum in the world is produced here, and platinum is South Africa's largest forex earner.

Platinum substituted by palladium in engines

The issue is that 50% of platinum mined is used in engine catalysts (which scrub noxious gases from motor vehicle exhausts), but is increasingly being substituted by palladium, which is cheaper. Amplats forecasts engine catalyst demand for platinum to halve in 3 decades, and sees this as a serious enough issue that they're entering the world of fuel cell development to create a fuel cell which uses platinum.

"We don’t want to be in the jewellery or fuel cell business. We just want the product to be used. We are excited about fuel cells because platinum in them cannot be substituted. In a 30-year strategy we are trying to get the platinum market to be a pure platinum market — fuel cells, jewellery and some of the catalysts in industry where you cannot use any other metal. We could never put a capital case forward for a palladium mine in SA and it’s very important we secure the use of platinum." said Neville Nicolau, CEO of Anglo American Platinum.

Platinum's loss is palladium's gain

The silver lining for South Africa, is that 80% of the world's palladium is also mined there. But whereas platinum sells for some $1400 per ounce, palladium is only about $620 per ounce.

What is Platinum?

Platinum is a chemical element with the atomic number of 78, and is the least reactive metal. Platinum is nonmagnetic & has a higher melting point than most other substances.

Uses of platinum

Platinum is used in catalytic converters, dentistry equipment, electrical contacts & electrodes, jewelery, laboratory equipment and platinum resistance thermometers.

Platinum or a platinum-rhodium alloy catalyst in the form of gauze is used to catalyze the partial oxidation of ammonia to yield nitric oxide (the raw material for fertilizers & explosives).

In 2010 global platinum sales were 16% up on 2009, at 245 tons, and consumption was accounted for as follows:

Conclusion

In the medium-term the demand for platinum is clouded by the possibility of its replacement by palladium. In the longer-term, as oil prices rise electric vehicles may become more popular, removing the need for autocatalysts.

Resources

http://www.platinum.matthey.com/

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