The growing importance of platinum in the hydrogen economy; discussion with WPIC

Platinum is going to play an important role in the green hydrogen production process. To better understand the implications of platinum in the hydrogen market, H2 Bulletin explores some key aspects of this, albeit smaller, but crucial market.  We interviewed Trevor Raymond, Director of Research at World Platinum Investment Council (WPIC) and asked about the platinum market. WPIC is a market development organisation created by the leading platinum producers to develop the global market for platinum investment demand.

Some basics

The importance of green hydrogen as an energy vector has been growing and at the heart of this emerging trend is water electrolysis technology. Currently, there are three significant electrolysis technologies which are alkaline electrolysis (AEL), proton exchange membrane electrolysis (PEMEL) and high-temperature electrolysis (HTEL). Alkaline electrolyser (AE) technology accounts for the large share of the commercial electrolyser industry and is the oldest and most matured technology. PEM electrolysis is a much more recent technology and is also commercially available on an industrial scale. Unlike AE, it does not require any liquid electrolyte and uses ‘proton exchange Membrane’ or ‘Polymer Electrolyte Membrane’ (PEM). This technology is more efficient than AE.

The major issue with PEM technology is the high cost owing to the use of precious metals in the catalyst. Platinum-based materials are used as a standard catalyst for the hydrogen evolution reaction.

Platinum belongs to a family of metals in the periodic table called ‘noble metals’, which are ruthenium (Ru), rhodium (Rh), palladium (Pd), silver (Ag), osmium (Os), iridium (Ir), platinum (Pt), and gold (Au). The more inclusive lists also consider copper (Cu), rhenium (Re), and mercury (Hg) as noble metals. One of the key attributes of these metals is their outstanding resistance to oxidation, even at high temperatures. In other words, these metals do not easily react and not involve in the Redox reactions occur in electrochemical cells, making them excellent for electrodes.

Out of the noble metals, platinum, palladium, rhodium, iridium, ruthenium and osmium, are called the platinum group metals (PGMs). They tend to occur together in the same mineral deposits. Platinum is quite a common household name due to its use in jewellery, though most people rarely heard about the other members of PGM. These six PGM metals are structurally and chemically resemble each other and have a wide range of applications.

Platinum end use demand
Platinum demand segmentations

 

Recent platinum market developments

H2 Bulletin asked Mr Raymond about the current conditions in the platinum market. “For 2021, our initial forecast (published last November) is for a platinum market deficit of -224 koz, the third consecutive deficit. In 2020, the COVID-19 pandemic reduced demand by 5% (-410 koz), but supply was down by 18% (-1,524 koz) due to the pandemic and a major processing outage.”

Indeed platinum prices remained subdued due to coronavirus last year, and the precious metal started its recovery at the last quarter, H2 Bulletin understands. But at a time when other precious metals such as gold and silver have been on the upwards trajectory reaching all-time highs, platinum has maintained its lagging tempo. Indeed, at a price point of $1,091/ troy oz, platinum is trading at a significant discount to gold’s $1,867/ troy oz.

“Despite the significant 1.2 million ounce deficit, the platinum price remained muted in 2020 due to the Covid-related reduced liquidity in the NYMEX platinum futures market. This issue was resolved last year and it now appears platinum’s price is starting to reflect its deficits and deep discounts to its precious peer, gold, and its industrial substitute metal, palladium.” Raymond added.

Future platinum market direction

“The weak platinum price over the past decade has reduced capital investment in mining in South Africa, which typically accounts for over 70% of global mine supply. Although the ZAR price per ounce received for the suite of metals sold by platinum mining companies has risen strongly since 2018, there are no major expansion projects set to materially increase platinum output in the near term,” he added.

H2 Bulletin understands that there are numerous projects in the pipeline though they are surrounded by some uncertainties. The underlying support from the market deficit to the platinum market has probably neutralised by factors such as the covid-19. These short term temporary changes should not have long-lasting impacts on the long term supply side. Russian-Zimbabwean platinum venture Great Dyke Investments (GDI), which is 50%  owned by Russia’s Vi Holding and Zimbabwean investors GDI, is expected to mine the first ore this year. Once fully developed, it has the potential to become the world’s largest world’s biggest platinum mine.

Electrolysers and platinum

H2 Bulletin understands that platinum has a vital role to play in green hydrogen production and fuel cells powered vehicles going forward. However, platinum demand growth is expected to see a significant uptick over the next five years as the water electrolysis market expands.

“The increased certainty, and importance, of green hydrogen in decarbonising transport and heavy industry, is driving the growth in its production. Platinum-based electrolysers to produce green hydrogen, which are more efficient than the alternative technology, will certainly increase platinum demand materially over the next ten years,” he added.

He pointed out that platinum is at the forefront of two key technologies that are unlocking the rapidly expanding, zero-emissions hydrogen economy – electrolysers and fuel cells. Platinum demand for fuel cell electric vehicles in 10 years is far more meaningful and is just as important to the hydrogen economy.

How much platinum would be needed?

“We estimate that the current EU and China green hydrogen generation capacity targets alone, of 40 GW and 30GW respectively, would require, cumulatively, between 300koz and 600 koz of platinum by 2030. This estimate is likely to increase once details are known of the new US administration’s hydrogen strategy,” he added

He further added that previously, scarce iridium was seen as limiting the adoption of the preferred PEM (proton exchange membrane) electrolysers. Johnson Matthey expected only 30% – 60% of electrolysers to be PEM. However, the recent breakthrough by Heraeus cuts iridium requirements by up to 90%, unlocking more widespread PEM adoption and more demand for platinum.

Growth pockets for platinum in the hydrogen fuel industry

He stated that “The short- and medium-term platinum demand growth from green hydrogen electrolysers and, mainly, heavy-duty fuel cell electric vehicles is interesting to investors yet modest. However, the interest of many investors, who had not previously considered platinum, has been piqued by this strategic underpin to the long-term demand for this unique metal.”

“When these investors take a closer look, they see platinum’s significant demand growth potential, due to platinum substituting for palladium in vehicle autocatalysts, as well as platinum’s use in the highly CO2-efficient mild-hybrid diesel powertrain. This, and platinum’s deep discount to gold, also greatly enhance the likelihood of investment demand growth,” he emphasised.

A substantial amount of iridium may be required

Highlighting the role, he said “The amount of iridium required to support widespread use of platinum-based PEM electrolysers in 2030 could be similar to the current annual supply of iridium. This has led some to predict that either alternative electrolyser technology will dominate or that extreme iridium price increases will adjust its use profile.”

“However, the forecast growth in green hydrogen to support decarbonisation also includes widespread use of fuel cell electric vehicles in 2030. This is likely to require at least 1 moz more platinum per annum. With far greater hydrogen economy certainty, platinum mine supply is likely to grow to meet this increased demand and consequently will result in the supply of more of the platinum by-product, iridium. It is worth noting that platinum ores contain all 6 platinum group metals, including iridium.” He concluded.

Editor’s Note:  This is the first part of our series on PGMs.  If you have any questions or want to share your views please feel free to contact us editor@h2bulletin.com or +44 (0) 208 123 7812

Obaid Shah

Obaid Shah is the Editor at H2 Bulletin and has decades of experience in commodities and economics. He frequently presents at international conferences. Obaid holds an MS in International Economics from the University of Glasgow, and before this, he secured an MA in Economics. His detailed bio is on the About Us page. Click on the email icon to send me an email or follow me on social media. I am reachable on Phone: +44 (0) 208 123 7812
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