Executive summary

Platinum is a critical mineral for the energy transition, and hydrogen-related demand for platinum is forecast to grow substantially through the remainder of the decade and beyond. Platinum catalysts in the electrolysis and fuel cell markets are expected to account for up to 15% of total platinum demand by 2030, reaching as much as 35% of total annual platinum demand by 2040.

Yet platinum has transitioned into a supply deficit in 2023, with WPIC’s outlook suggesting consecutive deficits sustained to at least 2027. Multi-year platinum deficits will draw down above ground platinum stocks and tighten markets at a time of rapid acceleration in the growth of the hydrogen economy.

Fortunately, there are existing end-uses of platinum where substitution with other platinum group metals (PGMs) could free up availability of platinum to ensure it is not a bottleneck for the growing hydrogen economy. In this context, palladium is of particular relevance due to its use in autocatalysts, its primary demand segment.

Overview of the platinum market

The platinum market has entered a period of sustained deficits, with WPIC supply and demand data estimating a record deficit of 1,071 koz for 2023, and a second consecutive deficit of 353 koz forecast in 2024. Beyond 2024, WPIC’s most recent Two-Five-Year Supply/Demand Outlook indicates further platinum market deficits continuing each year through to 2027, when the deficit will reach a forecast 851 koz (figure 1). 

Figure 1: Platinum is forecast to move into market deficit from 2023

Multi-year platinum deficits, exacerbated by ongoing substitution of platinum for palladium in automotive end uses, will draw down above ground platinum stocks and tighten markets at a time of rapid acceleration in the growth of the hydrogen economy, and consequent demand growth for platinum in hydrogen-related technologies. Substitution of platinum for palladium in automotive end uses will reach an estimated 640 koz this year, rising to a forecast 700 koz in 2024. It is expected to peak at over 1 Moz per annum by 2025 (figure 2).

Figure 2: Platinum-for-palladium-substitution as a proportion of overall automotive demand for platinum

Overview of the palladium market

Palladium demand peaked in 2019, following eight successive years of supply deficits. Due to the impact of reduced automotive production during the pandemic, the palladium market swung to surplus in 2020, reverting to deficits in 2021 and 2022. 

Looking ahead, automotive palladium demand – responsible for some 80% of total palladium demand – is expected to stabilise as absolute vehicle sales are forecast to recover to pre-pandemic levels by 2025. In WPIC’s five-year palladium outlook, automotive demand for palladium grows modestly, rising to a high of 8,500 koz, albeit remaining some way below the pre-COVID record of 9,000 koz. This is partially offset by declining industrial demand and flat jewelery demand (figure 3).

Figure 3: Industrial and jewelery demand decline offsets automotive growth resulting in a flat overall demand profile for palladium, below that of pre-COVID records

However, palladium transitions to surplus markets from 2025, forecast to reach 897 koz by 2027 due to a 1.2 Moz increase in palladium recycling supply between 2022 and 2027 (figure 4).

Figure 4: Palladium is forecast to move into market surplus from 2025

The biggest driver of supply growth is scrap supply (figure 5), as the scrapped end-of-life vehicles in the outlook period typically have higher palladium loadings, having been produced during a period when increasingly stringent emission standards have been imposed on vehicle fleets, resulting in overall higher PGM loadings. Total supply is additionally supported through increased mine supply as Russian and South African supply returns to historic output levels, based upon the mid-point of aggregated public company guidance. 

Figure 5: Globally, palladium output from autocatalyst recycling is forecast to rise 52% on 2022 levels, rising by 1.2 Moz to 3.5 Moz in 2027 where security of supply and subsequent price movements incentivized the change

Background to substitution

Platinum and palladium are co-products in polymetallic ores, typically found in association with the other PGMs, including rhodium, as well as gold, nickel and copper. Along with rhodium, they are key constituents in autocatalysts for curbing vehicle emissions. Although there are some physiochemical differences, as part of the PGM group, they are similar enough to be interchangeable, to a point, in many applications, and specifically in autocatalysts.  

Certain PGMs are better suited to particular applications than others. In the case of platinum and palladium used in vehicle emissions control, platinum catalysts are far less prone to sulphur poisoning, while the use of some palladium in catalysts enhances stability at higher temperatures. With the declining sulphur content of fuels over the past two decades, platinum and palladium in catalysts are interchangeable on a 1:1 basis.  

Setting the relative ratio of the PGMs in an autocatalyst occurs during the development of the emissions controls system for the engine of a new vehicle model or new emissions control level, to achieve subsequent regulatory certification. At this point, those ratios are locked in for the lifetime of that vehicle platform, typically seven years. Even though subsequent price movements might move the economics of the catalytic converter in an unfavourable direction, it is extremely unlikely that redesigning the emissions control system and going through the certification process again justifies the cost or risk, particularly in passenger cars. 

WPIC estimates that around 15% of vehicles produced in any given year are new models where substitution during development can easily occur. As a consequence, the ebb and flow of the substitution process plays out over an extended period of time and, for example, the platinum-for-palladium substitution currently underway is going to be locked in for many years to come.  

The substitution of platinum for palladium, and vice versa, is not a new phenomenon in either gasoline or diesel drivetrains (figure 6), with the bidirectional ebb and flow a function of metal availability, security of supply, and economics (relative pricing and catalytic effectiveness). Commodity prices are impacted by supply demand/imbalances and, in the event of oversupply, the price of a commodity would normally be expected to fall until uneconomic supply is curtailed, or the price falls to a level that attracts new demand into the market. Conversely, in the event of a market being in undersupply, the price of a commodity is expected to increase until new supply is attracted to the market, or demand is priced out of the market.

Figure 6: Historic bidirectional substitution between platinum and palladium in gasoline and diesel drivetrains based on metal availability and economic viability, following a material surplus or deficit where security of supply and subsequent price movements incentivised the change

The polymetallic nature of PGM bearing orebodies means that there are multiple price inputs establishing the economics of production. Thus, supply is unlikely to react to the changing fortunes of any one specific commodity. Primary mine supply is therefore highly (but not totally) price inelastic. However, the substitutability of platinum and palladium helps balance the market, to an extent, over time with the automotive sector historically switching between PGMs when market imbalances arise.

Reverse substitution

As platinum heads into a series of sustained market deficits from this year and palladium heads towards a series of market surpluses from 2025, WPIC anticipates an eventual closure of the platinum/palladium pricing differential. Consequently, the trend of platinum-for-palladium substitution in autocatalysts will slow, and eventually cease with a period of palladium-for-platinum ‘reverse’ substitution beginning from 2025 (figure 7).

Figure 7: Palladium substitution for platinum to commence in 2025, but it will take time to reverse out the embedded platinum substitution for palladium that will have occurred by then

Even though the substitution trend will begin to switch from 2025, it will nevertheless be the peak year for platinum-for-palladium substitution. Reverse substitution will build over time, assuming that it is limited to new vehicle models, with WPIC estimating it will result in approximately 366 koz of additional palladium demand by 2027.    

Importantly, this will free up platinum supply to be made available for the rapid growth in the hydrogen economy expected in the mid to late 2020s, meaning platinum availability will not be a bottleneck in the development of this key energy transition technology.

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