Hybrid vehicles give lifeline to Platinum Metals

In the next few years, a surge in hybrid car sales as the electric vehicle market slows will likely lead to an unexpected increase in demand for platinum group materials (PGMs), similar to what is predicted for coal's extended life.

PGMs – primarily platinum and palladium – face a long-term decline in demand, as their primary use was to clean auto exhausts – a process not required in pure EVs.

Few years ago, prospects for producers of PGMs such as Anglo Platinum Impala Platinum Sibanye Stillwater seemed grim, as electric vehicle sales were surging and the demand drop was expected to occur quickly.

A decline in EV sales and a rise in hybrid car demand, which requires catalytic converters in order to reduce pollution, has given PGMs a second lease of life. This could help keep prices down and some mines in operation for longer.

Marcus Garvey is the head of commodities strategy for Macquarie Bank, Singapore.

According to Rho Motion, the increase in global sales of pure EVs in the first half 2024 slowed down to 11% on an annual basis, while sales of plug-in hybrids (PHEVs) jumped by 44%.

The figures for EVs are down from the 77% sales increase two years ago.

BYD Song and BMW 3 Series are popular PHEVs.

Garvey said that the PGM situation was similar to coal. Coal is being phased-out as governments reduce carbon emissions. However, it will be required for many years before more renewable energy can be introduced.

Prices are low for PGMs, which is limiting investment. If miners shut down operations because of the low profitability they could cause prices to become volatile.

Garvey stated that "the scope for the markets to tighten than projected currently seems very, very large if we begin to see some producers responding."

HYBRID STREngth

Analysts said that the rise of hybrids may last until 2030, or even longer. This would extend the time when PGMs will be needed.

The shift towards hybridisation is important for the long-term sustainability of PGMs. Wilma Swats, director of PGMs with consultancy Metals Focus said.

According to Johnson Matthey, a specialist in PGM and catalysts, the weakness of EV sales has led to a 9% increase in combined sales for hybrid and petrol cars.

In a report it stated that "this alone added 600,000.0 ounces to the estimates of our automotive PGM demands." It also noted that last year, total demand for auto PGMs rose by 8% to 13,1 million ounces - the second highest ever total.

HYBRID PLUG-INS ARE SURGEING IN NUMBER

In the first half of this year, sales of PHEVs in China grew by 70%.

Consultancy Alix Partners more than doubled their forecast of the global share for PHEVs by 2030, from 5% just two years earlier.

Gerrit Reepmeyer, Alix, said: "We've marked it up quite a bit because of the changes in the past couple of years."

In the United States and China the two largest car markets in the world, more than 80 percent of those who would be likely to purchase an EV are leaning towards a hybrid electric vehicle (PHEV) rather than a pure electric vehicle.

Swarts stated that this could increase PGM demand, as PHEVs require about 10-15% higher levels of platinum metals than petrol cars. This is because cold-starting engines produce more pollution. Hybrids, and especially PHEVs are rarely used, so the petrol engines often start cold.

SHIFT RESOURCES

Analysts predict that the trend toward hybrids will continue until EVs are competitively priced with petrol vehicles worldwide, and batteries have longer driving ranges.

Many automakers are happy to shift resources towards hybrids because they have higher margins.

Last week, it was reported that the world's largest automaker, Toyota, had slashed by a third its EV production plan for 2026, and Volvo Cars, of Sweden, scrapped its goal to go all-electric by 2030.

Ford, Toyota and Stellantis all buffed up their hybrid plans over the last few months.

Swarts stated that automakers are looking for the sweet spot between profitability, consumer acceptance, and regulatory compliance.

The new U.S. auto emissions regulations are also a boon for hybrids, as they allow automakers to meet an EV mandate through the production of more gas-electric hybrids.

In the first half 2024, conventional hybrids sales in the U.S. grew by 33%.

Swarts stated that each additional million cars requiring catalysts would add approximately 150,000 ounces to the PGM demand.

Many consumers in China are choosing plug-in hybrids with extended ranges, as EVs already cost the same as petrol cars. These vehicles use the petrol engine solely to charge the battery and provide longer driving ranges.

No Help for Nickel, Cobalt

Hybrid batteries, which are smaller than those used in electric vehicles, will reduce demand for cobalt and Nickel.

According to CRU, the weighted average size of a PHEV's battery for the first six months of this year is 23.3 kilowatt-hours (kWh), as opposed to 64.5 kWh in pure battery EVs.

Sam Adham is the head of CRU's battery materials division. He said that the shift to PHEVs, and the retraction of BEV targets will likely have a negative impact on the growth of the battery material market over the next several years.

(source: Reuters)