Platinum Group Metals
Covid-19 Market Impact and Investment Thesis
3-Part Series - July 2020
Dr David Davis PhD. MSc. MBL. CEng. CChem. FIMMM. FSAIMM. FRIC.
Precious Metals Consultant
David Davies is supporting and producing research for our joint companies Indigo Precious Metals Group and Auctus Metal Portfolios to effectively support our team's analysis and ensure our clients correctly recognise the relevant investment thesis alongside investment time frames.
During this period of enormous global monetary debasement and our ongoing global debt crisis the demand for non-correlated assets and safe-havens of wealth preservation is now all-encompassing.
In this review David Davies focuses on the impact the COVID-19 pandemic has had, and continues to have, on the supply of PGMs (platinum group metals) from the South African (SA) mining industry.
Now it has to be understood that SA production is the predominant supplier of fresh PGM supply on the global stage and hence understanding the picture on the ground in SA has a considerable impact on the entire investment thesis.
He assesses the impact of the fall in South African PGM supply on global supply and ultimately the effects on the price of platinum, palladium and rhodium.
It should be noted that the global supply of PGMs depends heavily on the South African mining industry. South Africa supplies some 73%, 35% and 82% of global platinum, palladium and rhodium respectively, and consequently is a significant contributor to the global PGM industry.
The COVID-19 pandemic has severely impacted both the supply and demand for PGMs. This impact is due to the lockdown and temporary closure of mining and industrial operations by governments to curb the spread of COVID-19. In addition, and simultaneously, COVID-19 has had a severe impact on the global financial economy sending many countries into economic recession. In this regard, supply and demand as well as financial destruction represent a worst-case scenario for any chance of global consumer growth in the short to medium term.
Turning to the PGM industry, key supply and demand questions that arise among others are:
By how much and for how long is this ongoing situation going to aggravate the global supply?
By how much will the primary supply of PGM from South Africa fall and hence global supply fall year-on-year in 2020?
Hard data is pointing to structural deficits in the global supply/demand picture and these deficits are to escalate every year moving forward, pointing clearly to the eventual and pronounced price revaluation in platinum in particular.
Similarly, by how much will global demand decline y-on-y in 2020?
Again data is demonstrating that even with the global industrial recession and downturn the production numbers are ever lower than reduced demand.
And, will the market balance of platinum and palladium be favourable to not only support current prices but ultimately drive prices much higher ?
Enormous investment opportunity lies ahead for the investor.
In compiling this review, David Davies has had in-depth discussions with well-known and senior PGM analysts, mining executives and operators. He has also reviewed the latest published research from Johnson Matthey, Metal Focus and SA Oxford and Mining Reviews.
CLICK HERE to download the Part 1
CLICK HERE to download the Part 2
CLICK HERE to download the Part 3
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