Current trends suggest that there will be no obvious catalysts for an upswing in platinum group metals (PGM) next year although lower interest rates and falling yields will likely support investment demand for gold, heralding mixed prospects for South African producers of precious metals.
South African is a big producer of PGM while it is also host to some large-scale gold miners. The PGM industry has been encountering persistently lower prices although executives with PGM companies believe prices will uplift in the near to medium term outlook.
However, Oliver Schuh, senior director for metals and mining at Fitch Ratings, yesterday said that there was likely to be only a slight increase in platinum and palladium prices for 2025.
“No obvious catalysts exist to push prices higher in 2025. We assume a slight increase for platinum and palladium prices to USD1,050/oz, reflecting our view that producers will evaluate the progress of cost-cutting efforts and then decide on next steps, including potential supply cuts at mines that will remain free cash flow negative long-term,” said Schuh.
There is likely to be a supply deficit for PGM this year, similar to 2023.
Fitch holds a BB- outlook for Sibanye-Stillwater, one of the big South African PGM producers. The agency’s rating position for Sibanye-Stillwater “reflects significantly weaker earnings at a time of growth investment” in battery materials.
Fitch expects free cash flow for the company to remain negative over the 2024 to 2026 period.
“Business plan execution risks have visibly increased in 2024 with the group embarking on broad restructuring and cost-cutting,” said Fitch Ratings of Sibanye-Stillwater.
Anglo American had also decided to spin-off its South African PGM producing unit, Anglo American Platinum (Amplats) following a strategic review of its portfolio this year.
The significantly lower PGM basket prices had resulted in profitablity in Amplats sliding, with the company cutting its dividend.
Amplats was now targeting a reduction in costs of around R10 billion in 2024. This will be spread across operating and capital expenditure, including 3 700 headcount reductions, re-focusing capex on maintenance spending and re-assessment of vendor and contractor services while a smelter has been placed on care and maintenance.
Although alternative applications such as the hydrogen economy could provide support for platinum and iridium demand in the long-term, “adoption is quite slow with only a few large-scale projects underway,” said Fitch.
“In a weak macro-environment with higher interest rates and low GDP growth, platinum and palladium prices have performed poorly in 2024. All major PGM producers are implementing cost-cutting initiatives but have so far shied away from meaningful production cuts,” said Schuh.
With gold prices holding at record highs, Fitch is positive of the outlook and prospects for producers such as AngloGold Ashanti. Fitch said AngloGold Ashanti’s BBB-/Stable recent outlook stabilisation reflects progress with productivity improvements across major assets and improved scale and average cost position.
This follows the company’s closure of the Centamin plc acquisition. Against this backdrop, Fitch expects AngloGold Ashanti’s Ebitda gross leverage to average 1.3x over 2024-2027, providing “material headroom against its negative leverage” sensitivity.
BUSINESS REPORT