PLATINUM
OVERVIEW OF PGM MARKETS
24 NOVEMBER 2016
David Jollie, Market Analysis Manager
Miss South Africa Platinum Crown 2013 - 2015
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2
OVERVIEW
1
Primary supply
2
Secondary supply
3
Current demand
4
The automotive sector – opportunity or challenge
5
Platinum jewellery
6
Demand stimulation
7
A few thoughts on pricing
8
Questions
3
1 Primary supply
WHERE DO THE PLATINUM GROUP METALS COME FROM?
Mogalakwena mine
Jewellery recycling
Auto catalyst recycling
Norilsk
4
1 Primary supply
GLOBAL PLATINUM GROUP METAL SUPPLY
A declining supply picture emerges at the end of the decade
Global platinum supply 2015-2025 (000 oz)
CAGR
2015 – 2025: 0.1%
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2015
2016
2017
2018
Recycling
2019
2020
Other mining
2021
2022
South Africa
2023
2024
2025
Source: SFA (Oxford)
5
THE PRIMARY CASH COST CURVE
1 Primary supply
2016 cash costs
Spot price, 16 Nov
Source: SNL
6
1 Primary supply
WHAT WILL HAPPEN TO PRIMARY SUPPLY?
South African production and capex
Refined platinum production versus capital expenditure (2015 money terms)
Source: Venmyn Deloitte
7
1 Primary supply
WHAT COULD SUPPLY LOOK LIKE?
Bring on new supply is challenging
Source:
Johnson
Matthey
8
2 Secondary supplyy
MODEST GROWTH IN RECYCLING OF PLATINUM FORECAST
9
Source: Anglo American Platinum
3 Current demand
WHY DO PEOPLE BUY THE PLATINUM GROUP METALS?
10
Images: Platinum guild international; Johnson Matthey
3 Current demand
GLOBAL PLATINUM DEMAND BY SECTOR
Global platinum demand 2015-2025 (000 oz)
CAGR
2015 – 2025: 1.0%
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Source: SFA (Oxford)
Other
Jewellery
Automotive
11
3 Current demand
GLOBAL PALLADIUM DEMAND BY SECTOR
Global palladium demand 2015-2025 (000 oz)
CAGR
2015 – 2025: 1.1%
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2015
2016
2017
2018
2019
Other
2020
2021
Automotive
2022
2023
2024
2025
Source: SFA (Oxford)
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4 The automotive sector – opportunity or challenge
THE AUTOMOTIVE SECTOR
Annual light duty vehicle production
CAGR
2015 – 2025: 2.9%
120,000,000
110,000,000
100,000,000
90,000,000
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2013
2014
2015
2016
2017
Electric
2018
Hybrids
2019
2020
Gasoline
2021
2022
2023
2024
2025
Diesel
Source: LMC Automotive, Anglo American Platinum
13
4 The automotive sector – opportunity or challenge
WHAT IS THE FUTURE FOR THE DIESEL ENGINE?
Source: LMC Automotive
14
4 The automotive sector – opportunity or challenge
THRIFTING AND SUBSTITUTION
% of maximum emissions
Euro 5/Euro 6
Limited risk, and some opportunity as emission standards tighten
HC Hydrocarbon
CO: Carbon monoxide
NOX: Oxides of nitrogen
15
Source: Platinum Metals Review/Johnson Matthey
4 The automotive sector – opportunity or challenge
DEVELOPMENTS IN THE AUTOMOTIVE INDUSTRY
A degree of scepticism should be applied regarding future technologies…
16
4 The automotive sector – opportunity or challenge
THE FUTURE FOR HYBRIDS
Hybrids and Oil Prices in the USA
4.0
140
3.5
120
3.0
100
2.5
80
60
PHEV
BEV
EREV
FCEV
10%
8%
6%
4%
2%
FHEV: Full Hybrid Electric Vehicle
MHEV: Mild Hybrid Electric Vehicle
PHEV: Plug-in Hybrid Electric Vehicle
2025
2024
2023
2022
2021
2020
0%
2019
Jan 16
Aug 15
Mar 15
Oct 14
May 14
Dec 13
Jul 13
Feb 13
Sep 12
Apr 12
Nov 11
Jun 11
Jan 11
Aug 10
Mar 10
Oct 09
May 09
Dec 08
Jul 08
0
MHEV
2018
WTI ($/barrel, RHS)
0.0
FHEV
2017
0.5
20
2016
Hybrid US Mkt Share (%, LHS)
2014
1.0
Forecast EV Penetration Rates
12%
2013
40
2012
1.5
2015
2.0
BEV: Battery Electric Vehicle
EREV: Electric Vehicle with Extended Range
FCEV: Fuel Cell Electric Vehicle
Source: HybridCars.com, LMC, Bloomberg
17
4 The automotive sector – opportunity or challenge
ELECTRIC CARS – MYTH AND REALITY
18
Images: Tesla (top left); David Jollie (top right); Nissan (bottom)
4 The automotive sector – opportunity or challenge
INTERNAL COMBUSTION ENGINE CARS WILL BECOME MORE
EXPENSIVE BUT XEV PREMIUMS WILL DECLINE
HEV: Hybrid Electric Vehicle
PHEV: Plug-in Hybrid Electric Vehicle
BEV: Battery Electric Vehicle
FCEV: Fuel Cell Electric Vehicle
Source: Autonomie
19
5 Platinum jewellery
POTENTIAL FOR JEWELLERY DEMAND - CHINA
Source: Johnson Matthey
20
5 Platinum jewellery
JEWELLERY DEMAND - RETAILERS
Number of Chow Tai Fook points-of-sale in greater China
2,500
2,000
1,500
1,000
500
0
2012
2013
2014
2015
2015H2
Source: Chow Tai Fook
21
5 Platinum jewellery
UNCERTAINTY IN JEWELLERY DEMAND:
ECONOMIC GROWTH – CHINA
Growth in GDP components (bn USD)
700
600
Consumption
Investment
500
400
300
200
100
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Source: IMF, World Bank, Glaux Metal
22
5 Platinum jewellery
UNCERTAINTY IN JEWELLERY DEMAND:
DEMOGRAPHICS
Source: Chinese Bureau of Statistics
23
6 Demand stimulation
STIMULATING DEMAND – OUR STRATEGY
Investment demand
Grow investment demand via the World Platinum
Investment Council (WPIC) which will promote Pt as
an investment product
2
Jewellery demand
Grow sustainable jewellery demand and reduce
demand elasticity. e.g. by growing Pt purchases in the
Chinese and Indian bridal segments via the industry
funded Platinum Guild International (PGI)
Med-long
term
Three key focus
areas for further
development
Near Term
1
3
Industrial demand
Grow industrial demand through supporting
development of new PGM applications (specific focus
on accelerating fuel cell adoption)
24
6 Demand stimulation
DEMAND STIMULATION – INVESTMENT
25
Source: Johnson Matthey, Austrian Mint, Anglo American Platinum
6 Demand stimulation
STIMULATING INDIAN JEWELLERY DEMAND
From arranged marriages to true love
26
6 Demand stimulation
OVERVIEW OF EXISTING MARKET DEVELOPMENT ACTIVITIES
Leveraged / co-funded
Investment
model
Direct into
universities/
research facilities
Direct investment
Equity investment
FC Cofimvaba
Indirect investment and/or
advocacy programmes, leveraging
partners with similar interests
FC Vehicle
FC Mining Equipment
Example
Projects
FC Rural electrification
Research
Product
development
Early stage
businesses
Mature
businesses
27
6 Demand stimulation
STIMULATING DEMAND - NEW APPLICATIONS
Number of patents referencing each metal
3,000
2,500
2,000
Pt
1,500
Pd
Rh
1,000
500
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
Source: Espacenet, Anglo American Platinum
28
6 Demand stimulation
STIMULATING DEMAND - NEW APPLICATIONS
FOR PLATINUM
Source: Espacenet, Anglo American Platinum
29
7 A few thoughts on pricing
PRICE PERFORMANCE IN 2016
Source: Bloomberg
30