February Notes on PGMs and Autocatalyst Recycling
by Becky Berube
It is February 2025, the US election is behind us, and there is a new Administration, with policies that have geo-political and economic impacts that are yet unknown for Platinum Group Metals (PGMs).
Price Movement
When it comes to the price action for PGMs and scrap catalytic converters there are some historical and some forward-looking dynamics at play. As of today, the price of platinum is $987 per ounce, down approximately 29% from its 2014 price of $1,390 per ounce. Palladium has seen a rise to $1,055 per ounce, reflecting an increase of about 24.9% from its 2014 price of $845 per ounce. Rhodium has experienced a significant surge, with its current price at $4,850 per ounce, marking an impressive increase of around 297.5% from its 2014 price of $1,220 per ounce. A decade ago, the average price of a scrap catalytic converter was $50 and today is approximately $100 per unit. These changes highlight the varying market dynamics and demand shifts for these precious metals over the past decade.
Current Market Dynamics
Supply and Demand:
Platinum: The platinum market is expected to remain in deficit due to limited supply and increasing demand. South African production may see some improvement, but challenges like potential mine closures and reduced output persist.
Palladium: Palladium is also facing a deficit, driven by subdued secondary supply from recycling and a decline in demand due to the substitution of platinum in catalytic converters.
Rhodium: Rhodium prices are influenced by similar factors as palladium, with supply constraints and reduced demand from the automotive sector.
Automotive Industry:
The shift towards electric vehicles (EVs) is reducing the demand for palladium and rhodium, as these metals are primarily used in catalytic converters for internal combustion engine (ICE) vehicles. However, hybrid vehicles still require these metals, providing some support to their demand.
Economic Factors:
Inflation and Interest Rates: Higher interest rates increase the cost of borrowing, which can reduce industrial activity and demand for these metals. Additionally, a stronger US dollar makes these metals more expensive for buyers using other currencies, reducing global demand.
Geopolitical Events:
Political instability in major producing countries like South Africa and Russia can disrupt supply chains, affecting the availability and prices of these metals. The Russia-Ukraine conflict, for example, has had significant impacts on the supply of palladium.
Industrial Applications:
Beyond the automotive sector, these metals are used in various industrial applications, including electronics and green technologies like hydrogen fuel cells. Innovations and shifts in these industries can impact demand.
Outlook with the New US Administration
The Trump administration's policies are expected to have several impacts on the prices of Platinum, Palladium, and Rhodium:
Tariffs and Trade Policies:
The administration's proposed tariffs on imports could increase production costs for industries that depend on imported metals, potentially leading to higher prices for consumers. This could also encourage domestic production of these metals, although expanding production capacity takes time and capital.
Infrastructure Development:
Significant infrastructure development projects could boost demand for industrial metals, including platinum, palladium, and rhodium. However, the scale and timing of these initiatives will determine the overall impact.
Inflationary Pressures:
Tariffs and rising demand from infrastructure projects could drive inflation by increasing production costs for manufacturers. Higher inflation could lead to higher interest rates, which would strengthen the US dollar and potentially reduce the attractiveness of these metals as investments.
Environmental Policies:
The Biden administration's focus on green technologies and reducing carbon emissions could increase demand for platinum and palladium in hydrogen fuel cells and other clean energy applications.
Overall, the market dynamics for Platinum, Palladium, and Rhodium are influenced by a complex interplay of supply and demand, economic factors, geopolitical events, and industrial applications. The new US administration's policies are likely to create both challenges and opportunities for these metals.
Challenges
Tariffs and Trade Policies:
Inflationary Pressures: The new administration's tariffs on imports could increase production costs for industries that depend on imported metals, leading to higher prices for consumers. This inflationary pressure could result in higher interest rates, which would strengthen the US dollar and potentially reduce the attractiveness of these metals as investments.
Supply Chain Disruptions: Tariffs and trade restrictions could disrupt the supply chains for platinum, palladium, and rhodium, particularly if key suppliers like South Africa and Russia are affected. This could lead to supply shortages and increased prices.
Economic Policies:
Higher Interest Rates: To combat inflation, the administration may support higher interest rates, which can reduce industrial activity and demand for these metals. Higher rates also strengthen the US dollar, making these metals more expensive for buyers using other currencies.
Consumer Spending: Inflation and higher interest rates can pressure consumers' pockets, potentially reducing demand for products that use these metals, such as automobiles and jewelry.
Environmental Regulations:
Emission Standards: Stricter emission standards could increase the demand for platinum and palladium in catalytic converters, but the shift towards electric vehicles (EVs) may offset this demand. EVs do not require these metals, which could reduce their overall demand.
Opportunities
Infrastructure Development:
Increased Demand: Significant infrastructure development projects could boost demand for industrial metals, including platinum, palladium, and rhodium. These projects often require substantial amounts of these metals for construction and manufacturing.
Green Technologies:
Hydrogen Fuel Cells: The Biden administration's focus on green technologies and reducing carbon emissions could increase demand for platinum and palladium in hydrogen fuel cells and other clean energy applications. This shift towards sustainable energy sources presents a significant growth opportunity for these metals.
Domestic Production:
Encouraging Domestic Output: Tariffs on imports could encourage domestic production of these metals, although expanding production capacity takes time and capital. Increased domestic production could reduce reliance on foreign suppliers and stabilize supply chains.
Investment Demand:
Safe-Haven Assets: During times of economic uncertainty or market volatility, investors may flock to safe-haven assets like precious metals, driving up their prices. The administration's policies could create an environment where these metals are seen as a stable investment option.
These challenges and opportunities highlight the complex interplay of factors that will influence the prices of Platinum, Palladium, and Rhodium under the new US administration's policies.
The Trump Administration has signaled a shift in U.S. energy and climate policy, focusing more on fossil fuels and less on green technologies and carbon emission reductions. There is a strong emphasis on domestic fossil fuel growth, prioritizing energy independence and economic growth through traditional energy sources like oil, gas, and coal. Environmental deregulation efforts have been made to expedite reviews and permitting processes, benefiting fossil fuel projects but potentially slowing the development of green technologies. Despite the focus on fossil fuels, there is also support for nuclear and geothermal energy as part of the broader energy strategy.
Overall, the administration's policies are likely to create some challenges for the development of green technologies and efforts to reduce carbon emissions except for increased production of hybrid vehicles. However, there may still be opportunities in areas like nuclear and geothermal energy.
The positive news for PGMs could be a revitalized economy with increased gas-powered and hybrid car sales amidst a backdrop of supply deficits due to production and trade issues in South Africa and Russia. The following are macroeconomic indicators to watch. There is generally an inverse relationship between the value of the US dollar and the prices of these metals. When the US dollar strengthens, the prices of platinum, palladium, and rhodium tend to fall, and vice versa. So, a slightly weaker US dollar is better for PGM prices. Lower interest rates can weaken the US dollar and increase inflation, making precious metals more attractive as a hedge against inflation, thereby driving up their prices; however, interest rate hikes to fight inflation, therefore, can have the opposite effect.
Conclusion
A $100 scrap catalytic converter is better than a $50 converter, but not as great as a $300 converter average. All things considered, there is no likelihood of a spike in price. Remember, this is where the markets are today, and palladium and rhodium are both higher than a decade ago. Prices may remain bumpy within the recent range. Deploy a dollar-cost averaging strategy of selling material into current markets at regular intervals and attain the annual yearly average for PGMs.
For daily updates on the PGM markets, subscribe to the United Catalyst Corporation daily e-newsletter, the 60-Second Report, TEXT Daily to 844-713-PGMs (7467). To learn more about recycling converters on assay or the United Ecosystem Bid Tool, you can also call an Account Executive at 864-824-2003 or email a specialist at sales@unitedcatalystcorporation.com.
Becky Berube has served the recycling community for over thirty years. Based in Greenville, South Carolina as President of United Catalyst Corporation, she writes a monthly educational column for the industry and serves on several ARA and ReMa committees. She is a newly appointed Advisor on the US Industry Trade Advisory Committee on Critical Minerals.
She was a recipient of a 2023 South Carolina Women in Business Award and is a mentor in the Women in PGMs program. Additionally, Becky serves as an At-Large Director of the ReMa Southeast Board, Co-Chair of the IPMI Preventing Auto Catalyst Theft Committee, and is on the Board of Directors of the International Precious Metals Institute (IPMI), where she is a past President.
Becky (Temple) Berube
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