Platinum group metals like rhodium, palladium and platinum have for long not been as news-catching as investment vehicles when compared to other metals like gold and copper. However, experts working with Goehring and Rozencwajg, a South African investment firm specializing in natural resources, say PGMs are on the cusp of a bullish trend.
It is noteworthy that South Africa is the leading producer of PGMs globally and the country hosts approximately 90% of the global reserves of these metals. The country supplies approximately 81% of the new rhodium used globally, 73% of platinum and 38% of palladium.
The experts say that a mix of several factors is helping to set the foundation for a bull run in the PGM market.
First, they point out that the market is already experiencing shortfalls in the needed supplies of platinum and palladium. For example, in 2023, there was a 750,000-ounces shortfall of the needed platinum on the market. Last year, the supply deficit was 680,000 ounces. Data indicates that 2025 is also shaping up to experience a deficit, which makes it a 3-year streak of undersupply.
Given that limited supply often triggers price increases as buyers compete for the limited inventory, the stage is gearing up for bullish price movement.
Secondly, the growing interest in hybrid electric vehicles bodes well for the PGM market. PGMs are mainly used to make catalytic converters for ICE vehicles. Turns out, a hybrid engine needs an extra gram of PGMs compared to an ICE vehicle. This is because the catalytic converter works best when the engine is kept running so that it keeps within an optimum temperature range.
Hybrids run intermittently on electricity or gasoline/diesel. This means that the engine in a hybrid vehicle cannot run all the time, making it hard to maintain a desired temperature range for catalytic converter function. The extra PGMs help to bolster catalytic converter function in such circumstances.
As more hybrids are built, the quantity of PGMs needed by the market will increase, and that could trigger an uptick in prices.
Thirdly, more governments around the world are passing stringent emissions requirements for the automotive industry. India is now enforcing the BS7 standard; the EU is close to implementing the EU7 standard; China also released the CN7 directive. Other countries and jurisdictions are following suit. All these standards mandate increased efficiency in managing emissions in vehicles, and this will increase the demand for these metals given that about 65% of PGMs are used within the auto industry.
As all these conditions converge, the market is bound to trend upwards. This could put entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) in a good position to attract additional investment into their operations and offer enhanced shareholder value.
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