Market review

MARKET ASSESSMENT

WITH THE FUTURE IN MIND

The platinum market moved into deficit in 2012 owing to a fall in newly mined and recycled supplies. Supplies of platinum were negatively impacted by labour stoppages and mine closures in South Africa.

MARKET DEVELOPMENT AND BENEFICIATION
Amplats believes that it is important to invest in developing sustainable PGMs, because applications for these unique metals are largely derived. Together with various partners, the Company invests in a portfolio of activities ranging from lab-scale research and product development to investments in the early-stage commercialisation of products capable of driving PGM demand in the longer term. As far as possible, these market development opportunities are located in or focused on South Africa, so as to facilitate beneficiation of the metals produced.

Gross platinum demand declined by 140 koz or 2% in 2012 as weaker demand for autocatalyst and industrial applications exceeded the increases in jewellery demand, which responded to low prices. Primary supply of platinum was negatively impacted by labour stoppages and mine closures in South Africa. In addition, autocatalyst recycling decreased by 15.5% in 2012 owing to the lower platinum price.

Gross demand for palladium rose by 15% in 2012, owing to an increase in demand from the autocatalyst sector and a significant increase in investment demand. The palladium market moved from a surplus in 2011 to a deficit in 2012 as South African output was lower, also owing to labour stoppages and mine closures, and less metal was sold from Russian stockpiles.

The rhodium market moved into balance in 2012 after years of surplus, with reduced supplies matching increased demand primarily from the autocatalyst sector.

If South African platinum production returns to pre-strike levels, then the market would be oversupplied.

Platinum supply and demand
(000 oz) 2012 2011
Supply    
South Africa 4,285 4,855
Russia 790 835
North America 340 350
Other 440 440
Primary supply 5,855 6,480
Autocatalyst recycle 1,035 1,225
Jewellery recycle 785 810
Industrial recycle 10 10
Secondary supply 1,830 2,045
Gross supply 7,685 8,525
Demand    
Autocatalyst: gross 3,040 3,105
Jewellery: gross 2,735 2,480
Industrial: gross 1,720 2,050
Investment 460 460
Gross demand 7,955 8,095
Movement in stocks (270) 430
 

AUTOCATALYST SECTOR

Global light-vehicle sales grew by 5% in 2012 to 80.7 million units, reflecting a mix of growth and decline in different markets. Growth in North America, Japan and the BRIC nations (Brazil, Russia, India and China) offset weakness in Europe and other regions. The ongoing economic uncertainty in Europe continued to impact demand for new vehicles with sales 8% below those in 2011.

Gross demand for platinum in autocatalysis declined over 2011, with the increase in demand in Japan and other regions unable to make up for the decline in demand from Europe. The increased production of gasoline vehicles in 2012 underpinned a 7% increase in palladium demand and a 5.9% increase in rhodium demand. Palladium demand also benefited from continuing substitution of platinum by palladium in diesel vehicles.

Europe

The automobile market in Europe contracted in 2012 as a result of the ongoing economic turmoil in the region. The registration of vehicles was down by 8.3% year-on-year, while production fell by 6%. Output from European plants was given some support by demand for luxury vehicles in export markets, but a decrease in the output of diesel vehicles further eroded platinum demand in this sector. In addition, the move to smaller, more economical vehicles benefited sales of small gasoline vehicles to the detriment of sales of diesel vehicles.

The introduction of lean NOx traps for lean-burn gasoline engines is benefiting the demand for platinum; however, the increase in the fitment of lean NOx traps in 2012, ahead of legislation, was insufficient to make up for the overall decrease in the production of vehicles. The market for heavy-duty vehicles responds more closely to changes in economic conditions than does the market for light-duty vehicles, and OEMs reduced output in the face of the weaker economic conditions. Demand for platinum in the heavy-duty sector was firmer on account of the production of Euro VI-compliant vehicles ahead of enforced compliance in 2013. Demand will continue to be underpinned by the roll-out of Euro VI-compliant vehicles over the next two years.

Purchases of palladium in 2012, although slightly lower than in 2011 at 1.4 million ounces, were supported by an increase in the number of vehicles produced that meet the Euro VI emission levels. Palladium is also benefiting from an increase in the number of compressed natural gas vehicles being produced. Rhodium demand declined by 7%, in line with the decrease in the manufacture of gasoline vehicles.

Japan

Sales of light-duty vehicles recovered strongly in 2012, growing by 27%. Sales slowed in the closing months of the year following the expiry of the eco-car subsidy. Production rose to rose 20.6% over that of the previous year, which was beset by supply chain issues emanating from the earthquake and tsunami in March. Production is expected to decline in 2013, because of weak domestic demand and the relocation of some production capacity offshore. Japanese purchases of platinum increased by 19% to 563,000 ounces.

North America

Sales of light-duty vehicles in North America rose by 12.5% in 2012. Growth levels, however, were inflated by year-on-year comparisons with those for a weak 2011, when inventory was extremely low. In 2012, light-duty-vehicle production climbed 17%. Despite this, gross demand for platinum was flat as its substitution by palladium increased. Net demand growth remained negative as the growth in supply of metal from autocatalyst scrap exceeded demand growth.

However, the demand for palladium and rhodium increased strongly in line with the growing trend in substitution and a rise in output of gasoline vehicles, and purchases of the metals grew by 14% to 1.7 million ounces and 20% respectively.

China

The Chinese automobile market remained resilient in 2012, with sales of light vehicles up by 5.9%. Production also made strong gains, with a 5.9% increase. China is predominantly a gasoline market and platinum usage in the automobile sector is under 100,000 ounces per annum at present.

Palladium purchases were 8% higher year on year, reflecting the country’s increased production of automobiles. Purchases of rhodium also increased, growing by 8%. Demand for PGMs was further enhanced by the fitment of Euro V-equivalent exhaust gas systems as Beijing is expected to enact legislation mandating that vehicles meet the more exacting China V legislation. Some OEMs are fitting compliant systems ahead of the legislation.

Rest of World

Sales of light vehicles in the Rest of World (ROW) region rose by 4.2 in 2012, while the production of light-duty vehicles was 4.7% higher than in 2011. Strong growth in Brazil, India, Mexico and Russia underpinned the increase. The output of light-duty diesel vehicles rose by 18%, largely on account of their increasing popularity in India.

Demand for platinum in ROW grew by 34% in 2012, while demand for palladium use was 7%. The increase in demand for platinum was a result of strong automobile demand, particularly in India. Sales of passenger vehicles in India increased by 11% in 2012. More importantly, the diesel share of domestic production increased by 5.7 percentage points, to represent 49% of output. In a society where value for money is important, diesel vehicles are growing in popularity thanks to their greater fuel efficiency. Output from Mexico was also stronger, owing to increased demand from North America.

The recycling of autocatalyst scrap

Supplies of PGMs from the recycle of spent catalysts shrunk 13% in 2012 to 2.079 million ounces. Recovery of metal in Europe and North America was negatively impacted by collectors holding back stock in anticipation of higher PGM prices, while lower stainless steel prices kept dismantlers from decanning the catalysts which also reduced supplies of feed for processing. In Japan supplies increased as the recovery in sales of new vehicles in 2012 after the slowdown in 2011 resulted in more vehicles being scrapped in that year. In developing markets recovery of PGMs are increasing and reflect the historic growth of vehicle sales.

THE JEWELLERY SECTOR

Despite generally weaker economic conditions across the globe, strong demand from China and India saw gross platinum demand for the fabrication of jewellery increase by 10% in 2012, to 2.7 million ounces. With platinum no longer trading at a premium to gold, increased sales from consumer choice at point-of-sale occurred. In China retailers benefited from higher margins as, despite the lower price, retailers maintained weight-based platinum jewellery sales above those of gold. India continues to grow faster than other markets in percentage terms. The relatively lower price of platinum and its discount to gold will continue to support the jewellery sector in 2013. Gold’s premium is encouraging consumers to move from 18 carat white gold to platinum, while also resulting in restocking by retailers.

China

Gross demand for platinum for the fabrication of jewellery in China rose by 14% in 2012, to nearly 2 million ounces. The Chinese market continues to benefit from platinum’s discount to gold. The retail price of platinum has, however, remained higher than that of gold in most cities, delivering a better return on investment. 1.4 million ounces of platinum was purchased by manufacturers in 2012, 16% higher than in 2012. Recycling of old jewellery was half a million ounces. In China consumers tend to hand in old jewellery for recycling when upgrading to a larger piece and so the level of recycling represents increased demand for platinum in contrast to Western markets. Higher prices encourage consumers to upgrade and consequently hand in older jewellery pieces.

Europe

Gross demand for platinum for jewellery fabrication in Europe remained firm in 2012 despite the economic situation owing to the sovereign debt crisis. Gross demand for platinum was up 4.65% at 180,000 ounces. In the UK platinum gained market share from white gold owing to the price differential with the number of pieces hallmarked rising over 2011. Demand for top-end luxury items from the Middle and Far East benefited the Swiss watch industry which registered a 4% increase in the number of platinum watch cases hallmarked.

North America

North American jewellery fabricators purchased marginally less platinum in 2012 and the procurement of platinum totalled 184,000 ounces. Manufacturing has profited from the export market, where high-end brand-name stores in the Middle East and Asia are building stock. Furthermore, platinum’s discount to gold has improved its competitiveness in the domestic market. These factors, however, were insufficient to make up for destocking at manufacturers in North America.

Japan

Historically, the Japanese platinum jewellery industry has been predominantly a bridal market. With the aging of the population and a drop in the number of marriages in more recent times, the demand for platinum bridal rings has declined in Japan. A steady decrease in the weight of the jewellery pieces manufactured has further reduced purchases of platinum for jewellery manufacture. This fell for the third consecutive year, to 303,000 ounces. Overall demand was further negatively impacted by the supply of metal from old scrap and net demand for platinum was 22,000 ounces in 2012.

Rest of World

Demand for platinum jewellery in India was a highlight in 2012, expanding by 38% in ounce volumes. The country is primarily a gold market, however, the younger Indian consumer and a changing retail climate support a preference for white metals in jewellery. Platinum is associated more with emotion than wealth or investment, and possesses an international image. Purchases of platinum also benefited from an increase in exports of platinum jewellery from India.

INVESTMENT SECTOR

Investment demand for platinum was flat in 2012 compared to 2011, although the performance during the year was erratic. Japanese buyers of large bars were very active in the months when the price was lower with disinvestment in the last quarter when the price rose. Overall net demand was positive at 175,000 ounces. The release of the Canadian Platinum Maple Leaf and the Australian Platinum Platypus bullion coins also boosted interest in demand in the United States (US) and the ROW.

Exchange-traded funds

Platinum and palladium exchange-traded funds (ETFs) were launched in 2007, by ETF Securities in the UK and Zurich Kantonalbank in Switzerland. At the end of 2009, ETF Securities introduced a PGM product in the US and was soon followed by Swiss Bank Julius Baer, which launched its own offering at the beginning of 2010. Since then a plethora of products has been introduced, including a rhodium ETF. After a relatively uneventful first two quarters in 2012, interest in PGM investment counters rose from August onwards, when industrial unrest in the platinum-producing region of South Africa sparked fears of supply shortages. The net increase in investment in platinum ETFs was 192,900 ounces in 2012, marginally higher than net investment in 2011. After significant liquidation in palladium ETFs in 2011, positive sentiment returned in 2012. In the presence of strong underlying financial fundamentals, investors increased their holding in palladium ETFs, to 2.04 million ounces in 2012, a net increase of 286,200 ounces.

INDUSTRIAL SECTOR

A decline in purchases from the glass and electrical sectors in 2012 resulted in a decrease of 11% in demand for platinum for industrial applications, to 1.7 million ounces.

Chemicals

Purchases of platinum for the chemical sector declined by 5% in 2012, to 446,000 ounces.

Platinum catalysts are used in many chemical processes, for example the production of nitric acid, silicones and paraxylene. The major use of nitric acid is in the fertilizer industry.

Employing platinum catalysts to produce nitric acid is one of the oldest industrial uses of the metal. In the manufacture of nitric acid, ammonia gas is oxidised over a platinum−rhodium catalyst in order to produce nitric oxide, and is then further oxidised to form nitrogen dioxide. The nitrogen dioxide is added to water to form nitric acid. In this process a portion of the precious metals is lost, although palladium catchment gauze can be used to reduce the losses. Because of these losses, much of the consumption of platinum is top-up metal. It is only when new nitric acid capacity is created that demand increases significantly.

Platinum is consumed in the process of curing silicones, and thus demand for the metal follows the ebbs and flows of industrial activity in that sector. As with other industrial applications, growth has been most significant in China and ROW. In the area of process catalysts, investment in paraxylene capacity in China boosted demand in 2012.

Palladium-based catalysts are used in a vast array of bulk and speciality fine chemical production processes. Some of the bulk chemicals produced are acetaldehyde, hydrogen peroxide, oleochemicals, purified terephthalic acid (PTA) and vinyl acetate monomer (VAM). Growth in capacity for the production of PTA and VAM in China has underpinned palladium demand recently; while growing demand in India has also necessitated increased capacity construction. There has been little investment in capacity in Europe and North America owing to the economic uncertainty there. Overall, the offtake of palladium was 19% higher in 2012 than in 2011, at 529,000 ounces.

Glass

Platinum’s high melting temperature, strength and resistance to corrosion have resulted in equipment used in the glass industry being made from platinum alloys. Platinum and rhodium are used in the manufacture of liquid-crystal displays (LCDs), and platinum/rhodium bushings are used to manufacture glass fibre. Demand for LCDs has benefited from better sales of flat-screen televisions and new capacity is still being built in China. However, sales of platinum to the glass sector are not expected to have increased in 2012, since large amounts of metal are being returned from the closure of old marble remelt facilities. Net demand for platinum in this segment shrank by 65% to 184,000 ounces, while that for rhodium fell to 33,000 ounces.

Petroleum

Platinum catalysts are used in the reforming and isomerisation steps in the refining process. Losses in process are small, and so demand increases only when new capacity expansions are undertaken. Purchases of platinum by the petroleum sector decreased by 3% in 2012.

Platinum catalysts are also used in the production of biofuels.

Electrical sector

The purchase of platinum for electronic applications declined in 2012 by 16.3%.

Hard disks

Hard disks represent the single largest consumer of platinum in electronics. The addition of platinum to the cobalt alloy used in hard disks enhances the magnetic qualities of the alloy. This facilitates higher-density data storage and faster data access. The hard-disk industry was particularly badly affected by the Japanese earthquake and the Thailand flooding in 2011, and had not fully recovered in the first half of 2012. Purchases of platinum from manufacturers therefore continued to decline in 2012.

Thermocouples made of platinum and rhodium are used in the steel, glass and semiconductor industries. Demand for platinum in this application accounts for under 20% of electrical demand and fluctuates in line with the production cycles in those industries.

Palladium

Demand for palladium in electronic applications declined once again in 2012, to 770,000 ounces, which represents a reduction of 12%. The largest single area of palladium consumption in the electronic sector is in multi-layer ceramic capacitors (MLCCs), where palladium/silver conductive electrode material is layered between insulating ceramic wafers. Nickel-based MLCCs have been replacing palladium-based ones and now account for more than 80% of total output. However, thanks to palladium’s special physical properties, palladium-based MLCCs are still preferred for use in exacting environments such as aerospace and engine-management systems in vehicles.

Palladium is used with silver to connect electronic components in hybrid integrated circuits. It is also used to plate connectors that link components in electronic circuitry. Gold can also be used in this application, but palladium has a lower density than gold and can thus be used in smaller amounts. With palladium trading at a significant discount to gold, the threat of gold being substituted for platinum is low.

Lead frames are used to connect integrated circuits to other electronic devices. Some manufacturers use palladium to plate the frames, as an environmentally preferable alternative to tin-lead solder. Gold can also be used in place of palladium. However, the present price advantage that palladium has over gold is encouraging a move towards the use of palladium.

Palladium supply and demand
(000 oz) 2012 2011
Supply    
South Africa 2,380 2,560
Russia 2,850 3,480
North America 890 900
Other 420 420
Primary supply 6,540 7,360
Autocatalyst recycle 1,525 1,655
Jewellery recycle 195 210
Industrial recycle 520 480
Secondary supply 2,240 2,345
Gross supply 8,780 9,705
Demand    
Autocatalyst: gross 6,525 6,030
Jewellery: gross 450 505
Industrial: gross 2,485 2,480
Investment 285 (565)
Gross demand 9,745 8,450
Movement in stocks (965) 1,255
 

Dental alloys

The demand for palladium in dentistry is expected to have fallen slightly in 2012, to 538,000 ounces. Palladium and, to a lesser extent, platinum are alloyed with other metals for use in dental restorations such as crowns. Alloys high in gold usually contain platinum, while alloys low in gold contain mostly palladium (between 50% and 80%). In Japan the government specifies which alloy must  be used for subsidised dental work. The alloy, kinpala, contains 20% palladium. Japan is the leading market for palladium dental alloys, with consumption at 223,000 ounces in 2012, up marginally over the previous year’s. In Europe and North America, however, demand has declined in the wake of the increased use of base metal alloys and ceramics in dentistry.

Fuel cells

The principle of fuel-cell technology – an electrochemical reaction between hydrogen and oxygen which produces an electrical current – has been known since 1839, when it was discovered by the British physicist, Sir William Grove. Up to the 1980s fuel-cell technology had only been used in highly technical applications such as the Apollo space programme. In the 1980s and 1990s growing concerns over the environment and the promulgation of increasingly more stringent emission legislation focused attention on the fuel cell as a clean and efficient producer of energy. Following the adoption of the Kyoto protocol at the end of 1997, many nations focused attention on technology that would reduce global warming gases. The development of fuel-cell technology has benefited in the years since from government support. Platinum is used as a primary catalyst in a number of fuel-cell technologies including that of the phosphoric acid fuel cell (PAFC) and the proton exchange membrane (PEM) fuel cell. The demand for platinum in fuel cells has grown significantly in the last few years, albeit off a small base. Sales of combined heat and power (CHP) units have increased strongly in Japan following the Fukushima disaster. However, in the rest of the world large stationary PAFCs are competing with non-platinum solid oxide fuel cells (SOFCs). Many OEMs are planning to commercialise fuel-cell vehicles by 2015. It is critical that a hydrogen fuelling grid is available for this to occur. To this end certain countries, such as Japan and Germany, have programmes in place to provide hydrogen filling stations ahead of the introduction of these vehicles. The largest growth in fuel-cell systems has been in the portable sector. Fuel-cell electronic chargers for consumer electronics are available commercially and gaining a following worldwide.

 

Rhodium supply and demand
(000 oz) 2012 2011
Supply    
South Africa 595 641
Russia 91 72
North America 21 20
Other 25 32
Primary supply 732 765
Autocatalyst recycle 228 280
Secondary supply 228 280
Gross supply 960 1,045
Demand    
Autocatalyst: gross 778 712
Industrial: gross 142 179
Investment 42 15
Gross demand 962 906
Movement in stocks (2) 139
 

PRICE COMMENTARY

2012 was a volatile year for the platinum price with supply insecurities vying with macroeconomic factors in the market. Platinum made a promising start in the first quarter of the year climbing from an opening fix of $1,406 to the year’s high of $1,729 on 23 February. Platinum managed briefly to regain its premium to gold in mid-March as a strong dollar exerted pressure on gold. Macro-economic concerns over the crisis in the Eurozone dominated markets over the second quarter and platinum slipped below $1,600 in April. Platinum fell below $1,500 in May as reports of high unemployment in the Eurozone gave rise to steep declines in the precious metals complex. Announcements of mine closures in June failed to give support to the price and platinum continued to fall. The fall was exacerbated by economic concerns and the price fell below $1,400 in July. After realising the year’s low of $1,390 on 3 August platinum rallied strongly gaining $123 over the month and managed to breach $1,500 once again. Illegal walkouts at South African mines and the violent conflict spread across South African mines, igniting fears of prolonged supply disruptions. Supply concerns continued to dominate the market in September and these, together with high levels of speculative interest, underpinned a rise in the price to just short of $1,700 on 14 September. Supply concerns continued to dominate early in October, but were surpassed by negative economic news later in the month. A decline in the euro saw platinum fall to as low as $1,539 during the month. Platinum moved in tandem with gold for most of November but also benefited from a forecast of a deficit in the market with the price breaching $1,600 on 26 November. Platinum traded in a range between $1,585 and $1,615 until the last full week of trade when heavy liquidation saw the price losing $78. Platinum fixed at $1,527 on the afternoon of 28 December, 8.6% above where it started the year.

MARKET DEVELOPMENT AND BENEFICIATION

Amplats believes that it is important to invest in developing sustainable markets for PGMs, because applications for these unique metals are largely derived. Together with various partners, the Company invests in a portfolio of activities ranging from lab-scale research and product development to investments in the early-stage commercialisation of products capable of driving PGM demand in the longer term. As far as possible, these market development opportunities are located in or focused on South Africa, so as to facilitate local beneficiation of the metals produced.

The Company invests in market development and beneficiation across four broad areas overall:

  • The platinum jewellery market, both local and international.
  • Research into PGM applications at South African universities and research institutes.
  • The commercialisation of fuel cells.
  • The establishment of the PGM Development Fund to invest in local, early-stage industrial businesses that consume PGMs.

Developing the jewellery market

Together with other platinum producers, the Company supports the Platinum Guild International (PGI). The PGI has provided sales support and training to all levels of the global jewellery trade for over 30 years. In addition to supplying expert information and practical advice to help jewellery buyers, the guild also develops targeted marketing campaigns to stimulate interest and sales in platinum jewellery around the world.

In South Africa Amplats concentrates on building the design and manufacturing capability of platinum jewellers; providing jewellers with access to affordable metal; and stimulating demand for platinum jewellery. In 2012, the Company continued to support five training institutes that are geared to providing instruction in platinum jewellery design and manufacturing. In addition, it supported the Small Enterprise Development Agency’s Platinum Incubator in Rustenburg. This initiative, run by the Department of Trade and Industry, offers training in business skills for small jewellery manufacturers.

In line with the Government’s beneficiation objectives, Amplats continued to provide a metal consignment scheme to facilitate the local jewellery industry. The scheme allows for extended payment terms and gives jewellers the opportunity to manage price volatility.

During the year under review, the Company ran its 14th PlatAfrica design and manufacture competition, attracting a record 137 entries from professionals, apprentices and students. The pieces, submitted under the theme “Red Carpet Platinum”, showcased local design talent and high-quality workmanship. The annual competition and its related media campaign raises consumer and retail awareness of platinum jewellery in South Africa.

Research collaborations

Both Amplats and the Government realise that the development of local products can be enabled only by strengthening research capacity and building skills in the fields of science and engineering. To this end, the Company supports various PGM research programmes at South African universities and at the Council for Scientific and Industrial Research (CSIR). Some of the programmes are undertaken in collaboration with international researchers, and this allows the transfer of skills and access to new methodologies and equipment.

While these programmes are starting to show pleasing results, they are still at very early stages of development and for this reason are reviewed regularly. It is hoped that they will lead to the development and commercialisation of new PGM applications; drive demand in the longer term; and help to establish new industries in South Africa.

Fuel-cell product development

A key development area for platinum lies in accelerating the use of platinum-based fuel cells for the small- and large-scale provision of electricity in mobile, stationary and portable applications. Fuel cells are efficient, versatile and scalable, and offer significant medium- to long-term demand for platinum. This technology presents the following advantages:

  • It facilitates the switch from vehicles with internal combustion engines to electric vehicles.
  • It increases the availability of electricity in emerging economies with low rates of electrification.
  • It provides more energy- and carbon-efficient solutions in numerous other applications.

Given the Company’s extensive operations and its desire for safe, sustainable platinum, Amplats has been identifying uses for fuel cells in its own operations; and, together with its partners, is currently investing in the development of underground fuel-cell locomotives and a mining-cap lamp. The prototypes of both products are currently being tested, in order firstly to refine their design parameters and secondly to hone the business case for their commercialisation in South Africa.

Beyond the area of mining, the Company is also investing in the development of a fuel-cell home generator designed to provide efficient, reliable power to rural communities not connected to the electricity grid.

In parallel with these technical-product-development activities, the Company is focusing its efforts on creating a local manufacturing strategy; and on securing offtake as part of the commercialisation process.

Platinum Group Metal Development Fund

The Company established the Platinum Group Metal Development Fund (PGMDF) in 2009 to increase the use and application of PGMs in South Africa. This it does by investing in entities that either support PGM product development or use PGM technology in their products or processes. The fund provides capital to innovators and entrepreneurs during the early-stage development and commercialisation of PGM technology. The focus is on local beneficiation.

To date the fund, together with the Department of Science and Technology and USA-based Altergy Systems, has invested in Clean Energy Investments Proprietary Limited. Clean Energy provides fuel-cell-based back-up power solutions into the telecommunications industry. Installation, maintenance and fuelling is performed by South African companies and it is expected that fuel-cell units will be assembled and manufactured in South Africa once critical volumes have been reached.

OUTLOOK

Despite the less than optimistic outlook for global economic growth, gross demand for platinum in 2013 is expected to increase. However, supplies of metal from the recycling of spent autocatalysts are expected to rise as pipeline stocks are processed. Mined supplies of platinum could face further challenges in 2013 with high mining cost inflation pressuring margins at South African mines. Overall the market is expected to remain balanced in the short term.

Gross demand from the autocatalyst sector is expected to remain flat. Demand from the Japanese autocatalyst sector is forecast to decline from 2012 levels where it was boosted by the strong recovery following the 2011 disasters, while purchases by North American OEMs are to continue to decline with increasing thrifting and substitution. A recovery in the European automobile market is not expected in 2013 and light-duty diesel vehicles are losing popularity to smaller more fuel-efficient gasoline vehicles. However, the Company expects demand from platinum to increase in the European autocatalyst sector owing to the implementation of Euro VI legislation. Growth is expected to continue in China, albeit at a slower rate, while the increase in production of diesel vehicles in India will support demand in ROW.

The decline in industrial demand for platinum in 2012 is expected to recover somewhat in 2013 as LCD glass, glass fibre and chemical capacity growth resumes. The growing popularity of cloud computing and the associated demand for high-capacity hard drives will increase platinum demand from the electrical sector. Jewellery demand growth is expected in China and India in 2013. Popularity of platinum jewellery in India continues to grow, underpinned by an increase in organised retail and strong marketing campaigns. Continued expansion of retail outlets in mainland China by Hong Kong jewellers is supporting demand growth in China.

OTHER USES FOR PLATINUM

Platinum laboratory equipment

Platinum laboratory equipment

Most of the platinum that is mined in the world today is used in the manufacture of catalytic converters in exhaust systems. Together with fine jewellery, autocatalysts consume more than 70% of the world’s supply of platinum. However, platinum is also required in a great many industrial applications: some sources estimate that one-fifth of everything we use either contains platinum or requires platinum in its manufacture.As a result, and although individually not large, other applications requiring platinum together consume a significant amount of platinum each year. With purchases of 690,000 ounces in 2012 − a 17% improvement on the previous year’s figure − demand for platinum from this sector continued to strengthen.The bigger purchases were made mostly for non-catalytic automotive applications, for example oxygen sensors and spark plugs. As in the case of purchases for autocatalyst uses, the driver of demand for these components is the production of vehicles and the increasingly more severe exhaust emissions legislation. As legislation becomes more stringent, more oxygen sensors per vehicle are required.Besides this, the extended warranty period on vehicles in recent years has increased demand for spark plugs with a longer life. Platinum and, increasingly, iridium are being used in spark plugs to prolong their life.Platinum also plays an important role in biomedical applications, for example guide wires in vascular and other surgery, pacemakers and defibrillators. After guide wires, the cardiac rhythm management sector is the largest demand sector among biomedical devices. This sector includes pacemakers, implantable cardioverter defibrillators and cardiac resynchronisation devices. Platinum alloys are employed in stents used in cardiovascular procedures, and this use has boosted demand in recent years. Platinum is also used in the production of anti-cancer drugs such as Cisplatin, Carboplatin and Oxaliplatin.

Although discovered over 40 years ago, platinum-based drugs are still proving to be highly effective in the fight against this dreaded disease. Sales of Oxaliplatin (Eloxatin), which is used in the treatment of life-threatening metastatic colorectal cancer, rose strongly in 2012.

table115

Hard disks contain platinum group metals to enhance storage capacity

table116

Platinum laboratory equipment

table117

HDD catalyst manufacturing

table114

Platinum and to a much greater extend palladium are the principal platinum group metals used in dental restorations