BHP, Anglo American: why the platinum industry has lost its luster

BHP, Anglo American: why the platinum industry has lost its luster
BHP, Anglo American: why the platinum industry has lost its luster

London (awp/afp) – At a time when platinum prices are soaring, Anglo American wants to offload this activity, just like its Australian rival BHP, which is trying to swallow it up. An apparent paradox which can be explained by the obstructed future for this metal.

Used in the production of catalytic converters helping to reduce harmful emissions from combustion engines, platinum has suffered over the past three years amid predictions of a coming decline as electric vehicles replace traditional cars.

A darkened horizon which weighed on the prices of the metal, which lost around a third of its value from the start of 2021 until the end of April, before a clear rebound in recent weeks.

“A number of mining companies are complaining about the depression” of the platinum market, notes Dan Coatsworth, analyst at AJ Bell, interviewed by AFP.

In its takeover offer for the British Anglo American, BHP demanded that Anglo separate, among other things, its platinum production subsidiary, Anglo American Platinum, which claims to be one of the world’s leading producers of platinum group metals (which includes rhodium and palladium), and operates in South Africa and Zimbabwe.

Although having rejected this takeover proposal – BHP still has until Wednesday to present a new offer or withdraw – Anglo American immediately announced a project involving a similar split of its South African platinum activity.

This decision makes it possible to simplify the structure of the group, says Duncan Wanblad, managing director of Anglo American, who nevertheless assures that he “has full confidence in (the) future” of the platinum sector.

Anglo American had already announced at the start of the year its intention to cut thousands of jobs in its South African platinum activity, citing the low prices of this metal.

“In order to convince investors that it can have its own growth strategy that brings value to its shareholders”, Anglo American is now trying to “reproduce what BHP would have done: abandon platinum and diamonds in favor of the assets of most lucrative copper”, estimates Kathleen Brooks, analyst at XTB, responding to AFP.

The price of an ounce of copper has in fact jumped by around 27% since the start of the year and is breaking record after record.

Unlike platinum, the red metal is increasingly prized for its conductive properties and its malleability, which makes it essential for building “the new electrical infrastructures necessary” for the development of artificial intelligence and “for the future of renewable energies”, summarizes Ms. Brooks.

Skinny offer

However, despite weakening demand, platinum prices have also seen a sudden improvement due to “the prospect of a growing supply deficit”, explains Ole Hansen, analyst at Saxobank, in a note sent to the ‘AFP.

Already undersupplied, the platinum market is expected to be short 476,000 ounces this year, according to estimates from the World Platinum Investment Council released last week.

If these projections materialize, this would mark the second consecutive year of deficit.

This shortage is mainly explained by the reduction in production in South Africa and Russia, the two main platinum producers, which is expected to continue.

The drop in prices in recent years had pushed mining companies in South Africa to reduce their costs and production, while on the Russian side, processing capacity is limited by maintenance operations at a smelter, and Western sanctions are hampering the commercial exchanges.

Total supply could decline by around 1% in the current year compared to 2023, to 7.11 million ounces, according to the report, which expects a contraction in demand of 5% over the same time, at 7.58 million ounces.

Carsten Fritsch, analyst at Commerzbank, notes that the slight “expected increase in demand from the automotive sector” and in that of “jewelry” will not compensate for the heavy drop anticipated in other industrial areas, such as glass production or chemicals. .

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