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GFMS PLATINUM GROUP METALS SURVEY 2016

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Platinum Survey Cover 2016.indd 3 05/04/2016 11:16:41

THE GFMS TEAM AT THOMSON REUTERS GRATEFULLY ACKNOWLEDGES THE GENEROUS SUPPORT FROM THE FOLLOWING COMPANIES FOR

THIS YEAR’S GFMS PLATINUM GROUP METALS SURVEY

TANAKA PRECIOUS METALSA leading company in the field of precious metals, With superior creativity and technical excellence,

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As well as to the future of the planet through sustainable use of precious metals.

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We are one of the world’s largest manufacturers of minted ingots. Reacting to the demands of investors in different markets around the globe we are continuously carefully developing within the size range from 0.5 g to 1000 g, gold, silver, platinum and palladium minted bars in different forms and new designs. For our clients, according to their wishes we customize individually obverse and reverse of the bars, certificates and tailored packaging solutions.

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A Valcambi manufactured bar is not only sold at an outstanding price but is synonymous with unique craftsmanship, guaranteed fineness, transparency and reliability.

Heraeus Metal ManagementHeraeus Metal Management, a global business unit of the German technology group Heraeus, provides precious metal services including recycling, trading and related activities based on the company’s 160 years history. We are one of the world’s largest industrial refiners of platinum group metals (PGMs) and a leading name in precious metals trading. With sites in Germany, the United States, China, Hong Kong, South Africa and India, Heraeus Metal Management is active in every relevant time zone around the world.

Besides the physical supply of all precious metals, our service portfolio includes worldwide transfers and transportation as well as customized precious metal risk management and financing solutions. Through our global network of recycling and refining sites we recover precious metals from all different kinds of material and provide our customers with professional support in cross-border logistics, insurance and professional waste management.

Heraeus Metal Management is the reliable partner for integrated precious metal solutions.

Cover designed by Valcambi and executed by BtoB Creativity, Coldrerio, Switzerland.

GFMS PLATINUM GROUP METALS SURVEY 2016By:

Rhona O’Connell, Head of Metals Research & ForecastsWilliam Tankard, Manager, Mining Cameron Alexander, Manager, Regional DemandRoss Strachan, Manager, Regional DemandSudheesh Nambiath, Lead AnalystSaida Litosh, Senior AnalystJanette Tourney, Senior Analyst Johann Wiebe, Senior Analyst Ling Wong, Senior AnalystErica Rannestad, Senior AnalystSamson Li, Senior AnalystDante Aranda, AnalystNatalie Scott-Gray, Analyst Tamara Imangaliyeva, Analyst Gregory Rodwell, AnalystAlex Ji, AnalystHelen Cheng, AnalystBeverley Salmon, Customer Relationship Manager

PUBLISHED MAy 2016 By THoMSon REUTERS

The Thomson Reuters Building, 30 South ColonnadeLondon, E14 5EP, UKE-mail: [email protected]: financial.tr.com/eikon-metals

TAbLE OF CONTENTS1. Summary and Price outlook 5 • Introduction 5 • Platinum in 2015 6 • Palladium in 2015 7 • Rhodium in 2015 9 • outlook 9

2. PGM Prices 10 • Platinum & Palladium 10 • Rhodium 11

3. Investment 14 • overview 14 • Commodity Exchanges 14 • Retail Investment 15

4. Supply 18 • Mine Production 18 • Production Costs 23 • Autocatalyst Recycling 26 • Jewellery Scrap Supply 28 • Above-Ground Bullion Stocks 28

5. Demand 32 • Autocatalyst Demand 33 • Jewellery 40 • Dental 45 • Electronics 45 • Glass 47 • Chemical 48 • Petroleum 49

6. Appendices 51 • Appendix 1 - Platinum Supply and Demand (ounces) • Appendix 2 - Palladium Supply and Demand (ounces) • Appendix 3 - Platinum Supply and Demand (tonnes) • Appendix 4 - Palladium Supply and Demand (tonnes) • Appendix 5 - Rhodium Supply and Demand (ounces) • Appendix 6 - Rhodium Supply and Demand (tonnes)

FoCUS BoXES • Ruthenium and Iridium Prices 11 • Platinum and Palladium Price Correlations 13 • Platinum, Palladium and Rhodium Exchange Traded Funds 16 • Mergers, Acquisitions & Raisings in the PGM Mining Sector 24 • Trade Flows 30 • Fuelling the Future 50

THoMSon REUTERS SURVEyS:

GFMS GoLD SURVEy 2016 31st March 2016GFMS CoPPER SURVEy 2016 5th April 2016GFMS GoLD SURVEy 2016: Q1 UPDATE AnD oUTLooK 26th April 2016WoRLD SILVER SURVEy 2016 5th May 2016GFMS PLATInUM GRoUP METALS SURVEy 2016 12th May 2016GFMS GoLD SURVEy 2016: Q2 UPDATE AnD oUTLooK 26th July 2016GFMS BASE METALS REVIEW AnD oUTLooK october 2016GFMS GoLD SURVEy 2016: Q3 UPDATE AnD oUTLooK october 2016GFMS GoLD SURVEy 2016: Q4 UPDATE AnD oUTLooK January 2017

ACKnoWLEDGEMEnTS

The estimates shown in GFMS Platinum Group Metals Survey for the main components of mine production, scrap, fabrication, investment and stock movements are calculated on the basis of a detailed supply/demand analysis for each of the markets listed in the main tables. In the vast majority of cases, the information used in these analyses has been derived from visits to the countries concerned and discussions with local traders, producers, refiners, fabricators and central bankers. Although we also make use of public domain data where this is relevant, it is the information provided by our contacts that ultimately make GFMS Surveys unique. We are grateful to all of them.

ISSn: 2397-5784 (Print)

ISSn: 2397-5792 (online)

© THoMSon REUTERS 2016.

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DISCLAIMER oF WARRAnTIES AnD no RELIAnCE

This publication is provided by Thomson Reuters on an “as is” and “as available” basis. Thomson Reuters makes no representations or warranties of any kind, express or implied, as to the accuracy or completeness of the Thomson Reuters Content. Thomson Reuters is an aggregator and provider of information for general information purposes only and does not provide financial or other professional advice. Thomson Reuters is not responsible for any loss or damage resulting from any decisions made in reliance on the Thomson Reuters Content, including decisions relating to the sale and purchase of instruments, or risk management decisions.

TAbLE OF CONTENTS

UNITS USED:

troy ounce (oz) = 31.1035 grammes

tonne = 1 metric tonne, 32,151 troy ounces

• Unless otherwise stated, all statistics on supply and demand are expressed in terms of fine metal content.

• All references in this publication to “ounces” refer to troy ounces.

• Unless otherwise stated, US dollar prices and their equivalents are for the p.m. fixes of the London Platinum and

Palladium Fixing Company Limited for prices prior to 1st December 2014 and the p.m. LBMA Platinum Price and LBMA

Palladium Price from 1st December onwards and the Johnson Matthey London a.m. Rhodium Price.

• Throughout the tables, totals may not add due to independent rounding.

TERMINOLOGY:

”-” Not available or not applicable.

”0.0” Zero or less than 0.05.

”dollar”, “$” U.S. dollar unless otherwise stated.

“3PGM” Platinum, palladium & rhodium

”4E” Four elements: platinum, palladium, rhodium and gold (3PGM+Au).

”6E” Six elements: 4E plus iridium and ruthenium (5PGM+Au).

Estimates of supply include mine production and the recycling both of scrapped autocatalysts and old jewellery, but

exclude contributions from above-ground stocks, such as supplies from stocks controlled by state institutions in Russia.

Demand estimates are net of recycling with the exception of autocatalyst and jewellery, where gross demand is shown

- i.e. the total amount of metal absorbed to these two sectors. Estimates of recycling from scrapped autocatalysts and

jewellery are shown separately as part of supply given their scale and potential for change. Estimates of demand exclude

the movements of any above-ground stocks held within the specified industries, for example any changes in stocks held

by the automotive industry.

By simple arithmetic, this leaves either a “Physical Surplus or Deficit” (in previous publications “Gross Surplus or

Deficit”) before any movements in above-ground stocks are considered. This is a critical measure of the underlying

fundamentals of platinum and palladium and indicates the extent to which fabrication demand may have depended

on the release of above-ground stocks, or otherwise. At the same time, this also indicates the change in global above-

ground stocks.

Unless otherwise stated, all references to “above-ground stocks” of platinum and palladium refer to stocks of refined

metal, of a form and quality accepted as good delivery in the London and Zurich market and the world’s principal

commodity exchanges. Our supply/demand tables also show “Estimated Movements in Stocks”. These specific

movements relate only to above-ground stock holdings for which reasonable estimates of movement can be made and

attributed. A listing and breakdown of these appears in the more detailed tables in the Appendices section of this Survey.

Having allowed for the Estimated Movements in Stocks as defined above, the “Net Balance” (previously “Residual

Surplus or Deficit”) is arrived at by deduction. A negative Net Balance implies the extent to which other above-ground

stocks, including those held by financial institutions and/or investors, were released to meet fabrication demand.

Conversely, positive Net Balance implies the extent to which these other above-ground stock holdings were augmented.

However, this should not be construed as indicating the change in global above-ground stocks. For this, please refer to

the reported Physical Surplus or Deficit.

NOTES

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GFMS platinuM GROup MEtalS SuRvEy 2016

1. Summary and outlookIntroductIon

Average platinum, palladium, & rhodium prices fell by 24%, 14%, and 19% in 2015 on the back of a year unimpeded by industrial action in South Africa and amid a bad year for commodity returns generally. Production of combined platinum, palladium & rhodium (3PGMs) in the country rose by 37% to reach its highest level since 2011. The supply recovery outweighed price-positive demand and scrap developments last year. 3PGMs demand expanded at its fastest since 2011, by 2.3%, to hit a record high of a combined 18.0 Moz (558.3 t). Autocatalyst scrap fell 12%, the biggest drop since 2009. Anecdotally, this decline has been driven more by low steel prices than by weaker PGM prices, though both have weighed on spent autocatalyst collection rates.

In addition to the fundamental aspects described later, pricing has been hit hard by investor selling (as has the broader commodities complex); platinum investors reduced ETF positions by 0.26 Moz (8.1 t) and palladium

saw net sales of 0.73 Moz (22.6 t) over the year. Also important for platinum’s poor performance though has been the boost in production and apparent resilience of the mining industry (aided by equity investor support) from South Africa, while sentiment towards demand was hit by the EPA’s publicised discovery of emissions test violations in passenger diesel vehicles produced by Volkswagen. The dent in diesel’s reputation in light of the scandal pushed platinum prices lower as the market contemplated the metal’s future demand prospects. Diesel vehicles accounted for 64% of platinum autocatalyst demand from the light duty vehicle market last year, which compares to 17% for palladium and 27% for rhodium. Rhodium, meanwhile, whose supply is even more geographically concentrated in South Africa than platinum, was also adversely affected by a 1% decline in autocatalyst demand. This decline follows years of reduced demand on the back of thrifting as car makers strived to reduce their reliance on the costly metals. Palladium prices, while suffering alongside its sister metals, were buoyed by more robust growth

WoRlD PlATInuM SuPPly AnD DEMAnD

(000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 % Supply Change

Mine Production

South Africa 5,447 5,075 4,676 4,603 4,750 4,740 4,182 4,368 3,220 4,522 40%

Russia 948 917 830 793 785 818 803 741 687 721 5%

north America 366 324 342 294 238 389 338 337 397 365 -8%

others 262 267 309 358 411 457 472 565 552 550 0%

Total Mine Production 7,024 6,584 6,156 6,048 6,183 6,404 5,796 6,011 4,856 6,158 27%

Autocatalyst Scrap 832 909 1,006 785 902 994 924 1,045 1,087 931 -14%

old Jewellery Scrap 365 560 966 496 522 606 512 491 516 536 4%

Total Supply 8,221 8,053 8,128 7,329 7,607 8,003 7,231 7,547 6,459 7,625 18%

Demand

Autocatalysts 3,896 4,047 3,514 2,502 2,918 2,990 2,856 2,843 2,957 3,011 2%

Jewellery 2,210 2,061 1,847 2,678 2,201 2,388 2,585 2,646 2,548 2,456 -4%

Chemical 320 370 340 281 482 486 399 432 595 494 -17%

Electronics 404 397 292 254 252 225 195 169 162 151 -7%

Glass 449 431 507 91 505 338 323 84 (50) 163

Petroleum 167 151 190 163 168 143 126 106 122 100 -18%

other Industrial 463 472 456 431 494 559 621 649 700 721 3%

Retail Investment (22) 23 452 313 95 312 282 141 131 474 262%

Total Demand 7,887 7,951 7,599 6,714 7,114 7,442 7,388 7,070 7,167 7,570 6%

Physical Surplus/(Deficit) 334 102 529 615 492 562 (157) 477 (708) 54

Stock Movements (394) (402) 281 (574) (245) (539) (1,892) 1,082 210

of which ETF Release/(Build) (194) (102) (384) (574) (145) (239) (892) (218) 260

Net Balance 334 (293) 126 896 (82) 317 (696) (1,415) 375 265

lBMA PM Price (uS$/oz) 1,142.55 1,302.81 1,577.53 1,203.50 1,608.98 1,721.87 1,551.48 1,486.72 1,385.70 1,052.91 -24%

Source: GFMS, Thomson Reuters; lBMA

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in autocatalyst and chemical demand; both of these sectors have continued to replace portions of platinum requirements with palladium.

Amid the backdrop of a continued waning commodity cycle and the implementation of negative interest rate monetary policies in Japan and other countries last year, currency depreciation in South Africa also heavily influenced PGM prices in 2015. The South African rand depreciated by 26% from the end of 2014 to 8th December. This was driven in part by a strengthening u.S. dollar on the prospect of increased interest rates in the country but also on the back of diminishing expectations for South African economic growth and confidence in its political arena. With attention periodically on the cost of production from South African mines, the weaker rand has certainly lowered the dollar-denominated ‘price floor’ of platinum implied by such assessments.

PlatInum In 2015

A rebound in mine production last year pushed the platinum market back into a marginal Physical Surplus, despite improved demand. The scale of the surplus at the Net Balance level was exacerbated by stock movements.

Following the pronounced suppression of platinum mine production in 2014 owing to the five-month strike, output recovered by 27% to stand at 6.16 Moz (191.5 t) in 2015. In South Africa supply increased by 40% to 4.52 Moz (140.7 t). Producers’ concerted efforts to recover production volumes were maintained and an additional boost came from a release of in-process inventory by Amplats last year. Restructuring and mine suspension in light of weak dollar prices remained largely speculation with little action to close mines, and much greater emphasis on stringent capital allocation. As detailed on page 25, rand weakness and ‘normal’ production volumes pushed costs down by 23% last year and in the case of South Africa, back to a small positive margin at the Total Cash Cost level.

Global platinum jewellery scrap rose 4% last year to reach its highest level since 2011 of 0.54 Moz (16.7 t), driven solely by a 21% surge in Chinese scrap supply. The increase in China was driven by a combination of factors including increased collection points, a rise in distress selling, and upgrading of old items for new. Elsewhere, lower platinum prices saw recycling volumes fall sharply last year with Japanese and north American scrap flows slipping to near decade-low levels.

WoRlD PAllADIuM SuPPly AnD DEMAnD


Mine Production

South Africa 2,857 2,677 2,365 2,481 2,646 2,686 2,391 2,432 2,008 2,653 32%

Russia 3,164 3,049 2,701 2,677 2,722 2,704 2,624 2,527 2,582 2,575 0%

north America 1,024 995 908 688 726 959 953 934 978 925 -5%

others 310 329 407 475 518 512 528 575 568 561 -1%

Total Mine Production 7,355 7,050 6,381 6,321 6,612 6,861 6,497 6,468 6,136 6,713 9%

Autocatalyst Scrap 749 957 1,200 1,077 1,307 1,514 1,472 1,587 1,813 1,605 -11%

old Jewellery Scrap 234 185 192 116 179 248 223 230 248 266 7%

Total Supply 8,338 8,192 7,772 7,515 8,098 8,623 8,191 8,286 8,197 8,584 5%

Demand

Autocatalysts 4,433 4,793 4,484 4,022 5,271 5,560 6,140 6,339 6,602 6,888 4%

Jewellery 1,281 1,281 1,295 1,110 797 674 595 525 478 347 -27%

Dental 585 615 620 602 590 567 546 511 475 447 -6%

Chemical 410 388 374 305 368 383 377 410 395 401 2%

Electronics 1,219 1,275 1,347 1,240 1,451 1,487 1,500 1,378 1,358 1,209 -11%

other Industrial 86 91 91 83 100 103 109 110 117 116 -1%

Retail Investment 135 45 94 170 80 61 37 38 45 45 -1%

Total Demand 8,148 8,488 8,305 7,532 8,657 8,834 9,304 9,311 9,469 9,452 0%

Physical Surplus/(Deficit) 190 (296) (533) (17) (559) (211) (1,113) (1,025) (1,272) (868)

Stock Movements 1,613 620 899 593 (289) 1,282 (148) (300) (299) 577

of which ETF Release/(Build) (280) (381) (507) (1,089) 532 (448) (0) (899) 727

Net Balance 1,803 324 366 577 (848) 1,072 (1,261) (1,326) (1,571) (290)

lBMA PM Price (uS$/oz) 320.00 354.78 352.25 263.22 525.24 733.63 643.19 725.06 803.23 691.63 -14%

Source: GFMS, Thomson Reuters; lBMA

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Autocatalyst scrap declined by 14% in 2015, giving up the gains of the last two years to reach 0.93 Moz (29.0 t). The more mature markets of North America and Europe saw hefty double-digit falls last year as lower steel and PGM prices impeded the flow of scrap down the supply chain. In China, and other emerging markets where recycling is still in its infancy, scrap collection saw healthy year-on-year gains.

Turning to demand, platinum consumption in autocatalyst applications rose by 2% to 3.0 Moz (93.7 t) last year. In spite of continued positive sentiment, there have been considerable regional and sectoral differences in terms of performance. The off-road sector recorded a 24% increase, albeit from a low base, followed by the most important sector for platinum demand, light duty diesel, which saw a 5% uptick. In absolute volumes, Europe’s continued robust light vehicle production served platinum well last year coupled with the increased focus of OEMs towards emission compliant aftertreatment options that can stand the test of time in real driving conditions.

Platinum jewellery fabrication declined by 4% to an estimated 2.46 Moz (76.4 t) in 2015. China accounted for the bulk of this loss as economic pressures limited consumer spending on discretionary items. Resistance by retailers to reduce sticker prices as platinum traded lower also impacted demand. Elsewhere, European demand also suffered due largely to substitution losses and weaker export demand. In contrast, Japanese demand picked up marginally due to a shift away from gold to platinum, while North American offtake benefitted from a more robust economy.

Aside from the glass sector, which returned to being a net consumer of platinum last year, all major industrial segments were weaker in 2015. We estimate that

platinum consumed in the chemical sector declined by 17% to 0.49 Moz (15.4 t), driven by a significant contraction in paraxylene (PX) capacity. A sharp drop in Japan led demand for platinum in the petroleum sector lower, retreating by 18% in 2015, while electronic demand dropped due to economic weakness and a shift from traditional PCs to items with solid-state drives.

Although investment demand for ETFs was weak over the year with a net redemption of 0.26 Moz (8.1 t) platinum bullion for retail investment had a stellar year, rising more than three-fold to an all-time high of 0.47 Moz (14.8 t), with much of the growth centred in the Japanese market.

PALLADIUM In 2015

Palladium’s Physical Deficit eased appreciably in 2015 but remained large, at 0.87 Moz (27.0 t). Adjusting for stock movements (from ETF redemptions), the Net Balance shrank to a deficit of just 0.29 Moz (9.0 t).

Mine production of palladium grew by 9% to total 6.71 Moz (208.8 t) last year. Concomitant with platinum and rhodium, the overriding factor was a full year of operations from South Africa’s mining industry. The downward production delta for palladium was smaller than for platinum in 2014 for a number of reasons which made the recovery in 2015 that more shallow, at ‘only’ 32%, but sufficient to lift the country to the world number one position. Russian output was steady while Canadian production dropped by 10%.

Autocatalyst scrap supply retreated by a sizeable 11% in 2015 to an estimated 1.60 Moz (49.9 t). Despite the sizable fall, last year was still the second highest level recorded. Weaker metal prices saw recycling in some markets postponed, especially in the developed world,

WORlD PlATINuM DEMANDWORlD PlATINuM SuPPly

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Jewellery Scrap

Autocatalyst Scrap Platinum Price

Retail DisinvesmentMine Production

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Retail Investment

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Autocatalysts

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with recycling volumes in North America, Europe, and Japan all declining in 2015. In contrast, higher loadings levels continue to filter through into higher scrap flows in China and our Other Regions category, both recording double-digit increases.

Palladium jewellery scrap supply rose by 7% in 2015 to 0.27 Moz (8.3 t), a new historical high. Growth in palladium scrap sales was driven by China alone as weaker metal prices dragged down recycling volumes in other key markets.

Palladium demand in autocatalyst applications reached 6.89 Moz (214.2 t) last year, an annual increase of 4%. Contrary to platinum in autocatalyst applications, all regions but Japan recorded heathy gains. Global gasoline

vehicle sales volumes were supported by continued good access to credit (u.S.), tax breaks (China) or a general improvement in market sentiment (Europe). Sustained substitution from platinum into palladium in the heavy duty sector also played a positive role for palladium demand, although the rate of substitution has slowed.

Demand for palladium in industrial applications was broadly weaker, with total combined demand falling 7% to a 10-year low of 2.17 Moz (67.6 t). A double-digit percentage fall in electronics offtake, combined with 7% drop in petroleum demand helped offset a 2% gain in palladium used in chemical applications. lower palladium prices failed to arrest the slide in dental offtake which declined by 6% in 2015 due primarily to the continued substitution losses in all key markets.

WORlD PAllADIuM SuPPly WORlD PAllADIuM DEMAND

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Jewellery Scrap

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WORlD RhODIuM SuPPly AND DEMAND


Mine Production

South Africa 636 658 631 683 653 647 587 599 449 624 39%

Others 145 143 131 132 131 149 153 154 149 151 1%

Total Mine Production 782 801 762 815 784 796 741 752 598 775 29%

Autocatalyst Scrap 177 203 233 193 232 265 244 272 321 282 -12%

Total Supply 959 1,004 995 1,008 1,016 1,061 985 1,024 919 1,057 15%

Demand

Autocatalysts 826 995 934 740 784 748 741 716 675 667 -1%

Chemical 65 73 73 69 71 78 81 84 88 90 3%

Glass 70 76 60 34 103 129 64 92 51 48 -6%

Other 46 30 77 25 38 35 71 84 95 124 31%

Total Demand 1,008 1,173 1,144 868 996 990 956 977 908 929 2%

Physical Surplus/(Deficit) (49) (169) (149) 140 20 70 29 47 11 128

ETF Release/(Build) (17) (36) (49) (4) 5

Net Balance (49) (169) (149) 140 20 53 (7) (2) 7 133

JM london Price (uS$/oz) 4,557 6,191 6,564 1,595 2,453 2,021 1,275 1,064 1,173 952 -19%

Source: GFMS, Thomson Reuters; Johnson Matthey

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Jewellery demand fell for the seventh consecutive year, by 27% to 0.35 Moz (10.8 t), the lowest level since 2002. China was again the chief culprit as demand there plummeted 70% as several fabricators left the industry.

rhoDIUM In 2015

The rhodium market is the smallest and least liquid among the main three PGMs. Its supply and demand profiles are more concentrated compared to platinum and palladium, which exposes it to more country and industry-specific risk. To illustrate, South Africa accounts for 81% of mine supply, which compares to South Africa’s 73% share of platinum and just 40% of palladium.

Because rhodium is a less liquid market, its price is more volatile and historically has seen larger price swings. Since rhodium’s hike to $10,000/oz in 2008, the price has been very weak. In 2015, rhodium prices dropped 19% to average $952.29/oz. After prices surged to record levels eight years ago, users focused on reducing rhodium needs in an effort to lower their exposure to it. Rhodium was thrifted out of heavy duty trucks globally and, to a lesser extent, out of light duty trucks in the united States, which makes up roughly half of passenger car sales in the country. In the chemical and glass sectors, rhodium is alloyed with other PGMs as a strengthening agent. Rhodium usage in these applications was reduced too.

last year’s price decline was due to a stronger increase in supply relative to demand, which resulted in the largest market surplus since 2009. Supply rose 15%, driven by a 39% surge in South African mine output. The primary supply increase more than offset the 12% contraction in autocatalyst scrap. Meanwhile, demand rose a modest 2% last year. Autocatalyst demand dropped 1%, continuing a declining trend that emerged in 2011.

Rhodium’s main demand segments, auto, chemical and glass, made up 87% of demand last year. The “other” segment includes demand for jewellery, spark plugs, thermocouples, retail investment products, and other applications. This segment of demand can vary widely because jewellery and investment are very price sensitive sources of demand. The introduction of small rhodium bars in recent years has helped grow demand from this segment and was the main driver of the 31% increase in 2015 from the “other” segment.

The market surplus represents above-ground stock changes among dealers, banks, users, and the institutional investment community. Given last year’s price decline, much of the surplus may have been absorbed by dealers and banks rather than large investors. It should not be ruled out that investors have added to holdings though as a bargain opportunity.

While GFMS has kept a pulse on the rhodium market for as long as it has produced platinum and palladium market statistics, this survey marks the formal launch of our rhodium market coverage. The table (below left) is the culmination of years of market research and analysis.

oUtLook for 2016

GFMS forecasts the platinum market to return to a small physical deficit this year and palladium’s deficit is forecast to deepen in 2016. In the case of platinum in particular this will be driven by lower mine supply: There will be little addition from new projects in the development pipeline while the headwind of mines’ reduced capital spending is expected to start to weigh.

The extreme pricing action of commodities over the past six months though highlights the extent to which macro-economic factors are driving trading behaviour. Individual commodity fundamentals, even for industrial metals, have taken a back seat to the overriding factors of u.S. monetary policy and trajectory of the dollar, as well as continuing attention on Chinese growth and the extent to which this evolution can be ameliorated by stimuli. The GFMS forecast sees broad support from extremely gradual u.S. monetary tightening, paving the way for higher prices in 2016, particularly for palladium.

More detailed outlooks are produced by the GFMS team at Thomson Reuters, which presents its supply and demand forecast data, commentary, price forecasts and Mine Economics data to customers via Thomson Reuters Eikon subscriptions. For more information please visit: financial.tr.com/eikon-metals.

WORlD RhODIuM SuPPly & DEMAND

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US$/oz

Source: GFMS, Thomson Reuters; Johnson Matthey

Non-AutocatalystAutocatalyst scrap

Mine Production Autocatalyst

Supply Demand

Rhodium Price

10

pG

m p

ric

es

gfms platinum group metals survey 2016

2. PGM PRICESPlatinum & Palladium

In 2015, the platinum price posted the largest single annual drop since 2009, declining by 24% to an average of $1,053/oz; the lowest annual average in ten years. Intra-year, an episode of low volatility during the first half of 2015, at 15%, was followed by a second half of high volatility as news from Lonmin, Amplats, VW, and a stalling global economy rattled the markets. The platinum market remained cautious at the beginning of the fourth quarter, but weak Chinese economic data and fears that a Fed rate hike would trigger a sell-off in the precious metals complex, made platinum the worst performer in 2015.

Palladium prices last year averaged $692/oz, 14% lower than in 2014. This stemmed from a sharp contrast in market fundamentals compared to 2014, a year in which a deep market deficit provided price support. The absence of labour unrest in South Africa led to a 32% increase in output, reaching 2.7 Moz (83 t), which coupled with a 2% rise in scrap led to an 5% gain in supply of 8.8 Moz (274 t). Though demand remained unchanged, strong ETF outflows left the net balance at 87 koz (3 t); a sharp contrast against 2014.

The correlation between platinum and palladium continued to weaken over 2015. Though this provided investors with an alternative to the continued price erosion in platinum prices for the first half of the year and so the strong sell-off in the fourth quarter caused both metals to trade in tandem again.

On the back of renewed Grexit fears and the discontinuation of the Swiss franc’s cap against the euro, platinum prices started 2015 constructively with a

$100/ oz rally to $1,285/oz by 21st January. However, the lack of bullish bets in palladium left prices $13/oz below the start of the year at $778/oz. In the following weeks, the attention turned to the ECB’s €1Tr bond buying programme, which coupled with strong U.S. non-farm payroll data, fuelled a sell-off across all precious metals. Platinum broke $1,200/oz in mid-February, finding support at $1,100/oz a month later on dovish comments from the Fed regarding the outlook for the U.S. economy. In contrast to a robust labour market, a deceleration in the housing market put into question the appropriate timing of an interest rate hike. Between mid-February and mid-March, money managers on Nymex liquidated 9 tonnes, or 28%, off platinum’s position, and added 5 tonnes, or 9%, to palladium’s net long position.

Platinum remained range bound during April and May, trading between $1,115/oz and $1,175/oz on low turnover. Choppy trading held the 22-day historical volatility above first quarter levels until 19th May, when the ECB announced plans to accelerate its bond buying program. As a result, the U.S. dollar extended gains with the 10-year U.S. Treasury yield hitting a one-month high on 8th June. At end-June, the net money manager position stood at 10 tonnes, or 73% below the January high as short bets surged and long positions remained largely unchanged.

In July, the sell-off gained further momentum as fears of a Greek default and worries over the Chinese economy spread. On 17th July, platinum broke below $1,000/ oz fuelled days earlier by hawkish comments from Fed Chair Janet Yellen about the possibility of a 2015 rate hike. Yet, on 24th July, the sell-off came to a halt following Lonmin’s announcement to cut 100 koz of production over the next two years to support prices. However, before the end of the following week, the sell-off resumed, as the net long position across money managers remained unchanged at 10 tonnes despite a 3.3% inflow in platinum-backed ETFs by month-end.

Spot prices recovered in August on a short-covering rally that took platinum prices from $971/oz to $1,028/ oz. Nevertheless, bullish U.S. consumer confidence data boosted the U.S. dollar, bringing prices to $1,003/oz by month-end. On 8th September protests at Amplats’ Mogalakwena broke out, costing the group an estimated 8.6 koz of platinum production before operations resumed on 14th September. Yet upbeat wage data and a further drop in unemployment capped gains as the U.S. dollar remained strong.

PGM PrICES: SOUTH AFrICAN rANd

100

200

300

400

500

600

201620142012201020082006

Ran

d/kg

(tho

usan

ds)

500

1,000

1,500

2,000

2,500

3,000

Rand/kg (thousands)

Source: Thomson Reuters

Platinum

Palladium

Rhodium (RHS)

11

Pg

m P

rices


On 18th September, Volkswagen was caught in the middle of a diesel emissions scandal and told to recall 482,000 cars from the United States. Two days later, the company admitted wrong doing, causing its share price to collapse after the opening bell at the Frankfurt Stock Exchange on 21st September. Over this period, platinum shed $16/oz to $972/oz, while palladium lost $9/oz to $602/oz.

Over the first two weeks of October, poor U.S. macroeconomics data drove speculation in the futures market adding 17 tonnes, or 125% by month-end. However, with the emissions scandal at full force and ETF flows going in the opposite direction to net managed money, the price fall in November brought platinum prices to $827/oz, its lowest level since december 2008. The price fall caused palladium to revisit August’s low of $524/oz, but a slowdown in the liquidation of palladium’s net long position provided some support against further losses.

In the lead up to december’s FOMC meeting, prices were range bound as investors remained on the sidelines and the dollar Index (dXY) hovered near a 1-year high. On 16th december, the announcement of the first interest rate hike in nine years caused platinum prices to drop by $28/oz to $848/oz. Platinum ended the year at $868/ oz, while palladium finished the year at $555/oz.

rhodium

rhodium prices averaged $955/oz last year, 19% lower than in 2014 due to a stronger increase in supply relative to demand. The contraction in autocatalyst supply was offset by a 39% increase in mine output from South Africa, which left the net balance at a surplus after a modest 2% increase in demand.

Automotive catalytic converters account for the majority of rhodium demand. News mid-year about weak industrial demand and below market offers from PGM recyclers caused prices to fall from $1,070/oz in end-May to $760/oz in end-September.

The adoption of stronger emission standards did little to support prices over 2015 as the increase in demand appeared to be matched by supply. After a brief recovery in October, prices continued trending downwards as a sell-off across the precious metal complex gained full force. rhodium ended the year at $660/oz.

Au Ag Pt Pd Rh

2014 1,266 19.07 1,386 803 1,172

2015 1,160 15.68 1,053 692 955

Change (yoy) -8.4% -17.8% -24.0% -13.9% -18.5%

Source: GFMS, Thomson reuters; LBMA; Johnson Matthey

PrECIOUS METALS PrICE PErFOrMANCE

ruthenium & iridium Prices

In a year without a single daily price rise and on the back of

weak industrial demand, Ruthenium prices suffered their

seventh consecutive annual price decline in 2015. The price

started at $58/oz but declined gradually to reach an annual

low of $42/oz in late July, the lowest level since the start of

2004. Since then the price has remained flat.

Aside from its main use in electronics, ruthenium plating

on jewellery, with a distinctive jet black polished look, is

progressively becoming more prominent. However, the

increasing popularity of ‘cloud storage’, the decline in sales of

hard disk drives and thrifting of ruthenium have contributed to

its price drop over the last seven years.

After starting the year at $540/oz, Iridium prices rose to

$580/oz by mid-February 2015. Prices maintained this level

until mid-June when they fell. It was not until October that

prices started to rise again reaching $520/oz; 4% above the

annual low of $500/oz. despite lower prices, iridium demand

improved driven by the move of iridium alloy spark plugs away

from only focusing on purely high performance products to

the mass market. This was especially the case in Japan, where

iridium spark plugs make up 50% of the market share for

spark plugs. The other use of the metal is in high-temperature

crucibles used in the production of crystals for LEd displays

and although demand remained healthy, the very high

recycling rate undermines Iridium’s market balance.

rUTHENIUM & IrIdIUM PrICES

0

300

600

900

1200

Jan-16Jan-15Jan-14Jan-13Jan-12Jan-11

Iridi

um (U

S$/o

z)

0

50

100

150

200

Ruthenium (U

S$/oz)

Source: Thomson Reuters; Johnson Matthey

Iridium

Ruthenium

12

PG

M P

RIC

ES


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day

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6 7 9 10

11 12 13 14 15

16 17 18 19

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25 26 27

1

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es

13

Pg

m P

rices


Platinum and Palladium Price correlations

Thomson reuters GFMS believe the study of correlation

coefficients to be highly useful, not only as an indication of

underlying themes that may influence the market, but also to

confirm economic theory with empirical evidence. It must be

noted, however, that the existence of either a positive or inverse

correlation between two assets is not sufficient in itself to

establish direct causality.

The close relationship between platinum and palladium is

borne of their chemical characteristics. They are in the same

group of the Periodic Table, sharing similar industrial uses,

especially as catalysts. The automotive sector dominates

platinum and palladium usage in autocatalysts, representing

40% and 73% of gross platinum and palladium global usage

respectively in 2015. Unlike demand, the supply of both metals

is more diverse and so are the underlying fundamentals.

Contrary to what history suggests, the platinum and palladium

correlation was close to zero during the first quarter of last year,

as the platinum price tumbled while palladium rallied. In early

March, the platinum:palladium ratio fell to 1.40, the lowest level

since April 2002. For the first time since March 2014, platinum

traded at a discount to gold. The relatively poor platinum price

performance was due to a decline in Chinese imports combined

with a faster recovery in South African mine output, following

the five month labour strike. Palladium’s advance was driven by

strong auto sales from China during the first quarter.

Platinum typically has a closer correlation with gold than

palladium. This stems in part from platinum’s proportionately

higher jewellery demand, which used to be the largest market

segment (especially in Japan) until the automotive sector took

over the top spot. Over the 1992-2002 period, jewellery demand

averaged 43% of total platinum offtake, considerably higher

than the 32% share last year. Palladium’s role in jewellery,

which flourished in the late 1990s and early 2000s, has

retreated substantially, accounting for less than 4% of global

demand in 2015.

Both platinum and palladium’s correlation with oil was low

during the first half of last year. However, following the heavy

price slump in 2014, investors turned more bullish on oil, driven

by the continued decline in drill rigs in the United States.

Consequently, the oil price posted a 25% gain quarter-on-

quarter during the second quarter of 2015, as disagreements

in the discussions on Iran and its nuclear program with the

international establishment hampered Iran’s oil exports.

As a result, the correlation among all commodities revived in

the third quarter, and was particularly strong during the final

quarter of last year. That strong trend continued this year

as investors refocused on the Fed’s interest rate policy time

table, directly influencing the strength of the U.S. dollar. After

the non-event of the Fed’s September meeting, the hawkish

October FOMC statement caught the market by surprise, when

investors realised the possibility of another rate hike during the

final meeting of the year. Following that statement, the dollar

strengthened and was trading near a three-month high, in turn

putting pressure on the commodities spectrum. during the

start of this year, disappointing economic data from the U.S.,

combined with a more dovish tone from the Fed, convinced

investors to re-align their expectations on the interest rate

policy timetable. The continued relatively strong correlation

among different commodities and the euro suggested that the

Fed’s interest rate timetable would continue to heavily influence

price trends across various asset classes throughout the year,

including those of platinum and palladium.

PLATINUM, PALLAdIUM ANd OTHEr COMMOdITIES

(on log-returns in daily prices) 2014 2015 2015 2015 2015 2016

Q4 Q1 Q2 Q3 Q4 Q1 Platinum-Palladium -0.01 0.09 0.78 0.31 0.91 0.78

Platinum

Gold 0.77 0.92 0.74 0.57 0.94 0.93

US$/Euro rate 0.69 0.75 -0.49 -0.11 0.72 0.68

CrB Index 0.50 0.45 0.02 0.64 0.81 0.54

Oil (WTI) 0.57 0.05 -0.52 0.51 0.77 0.63

Thomson reuters Base Metals Index 0.21 0.14 0.70 0.60 0.92 0.88

Palladium

Gold 0.14 -0.13 0.55 0.45 0.95 0.62

US$/Euro rate -0.47 0.16 -0.25 -0.35 0.81 0.57

CrB Index -0.63 0.33 0.20 0.68 0.86 0.83

Oil (WTI) -0.64 0.24 -0.15 0.70 0.84 0.86

Thomson reuters Base Metals Index -0.39 0.03 0.81 0.53 0.95 0.79

Source: GFMS, Thomson reuters

qUArTErLY COrrELATION COEFFICIENTS

20

55

90

125

160

Jan-16Jul-15Jan-15Jul-14Jan-14

Inde

x, 2

nd Ja

nuar

y 20

14 =

100


Platinum CRB

Palladium Oil (WTI)

14

Inv

estm

ent


3. Investment•Total Identifiable Investment in platinum, which includes

retail investment and ETF inventory build, dropped by 39% in 2015 to 214,000 ounces (6.7 t). In indicative value terms, investment demand amounted to $225 million.

•The decline in our platinum Identifiable Investment figure was solely attributable to net outflows recorded from ETF investors, in which 260,000 ounces (8.1 t) of outflows were recorded over the period. Meanwhile, a surge in retail investment for bars and coins, driven by investors’ bargain hunting, somewhat limited the decline.

•Total Identifiable Investment for palladium turned negative in 2015, to total 683,000 ounces (-21.2 t), its first net negative position since 2011. Again, investors’ net outflows in ETFs were responsible for the decline.

•Meanwhile, rhodium ETF positions fell by 5% in 2015, to total 100,000 ounces (3.1 t), its lowest level since 2012.

commodity exchanges

Net investor positions on TOCOM futures are used to analyse investment activity on the exchange. Starting with platinum, and by year-end 2015, net long positions had fallen by 6% or 27,000 ounces (0.8 t). While this may at first look like an indication of a lack of investor interest, the analysis of intra-year developments reveals that the period between late May and July saw a rapid increase in investment demand. Net long positions soared by approximately 169,000 ounces (5.3 t) or 35% during the period, to hit a fresh high of 656,000 ounces (20.4 t) on 6th July. This was largely driven by bargin-hunting purchases on the decline in the yen-denominated platinum price, which fell by 6% over the period. The recovery in net long positions from the beginning of the year, in which net longs fell to a six month low on 26th January of 320,000 ounces (10.0 t), however, were short lived, as a brief rally in the yen denominated platinum price over late October and

early November resulted in investor long liquidation, once again dragging down the net long position to its second lowest point in the year on 28th October.

Turning to palladium, and net investor positions over the first half of the year were extremely volatile, shifting between net long and net short positions, driven directly by yen-dominated palladium price movements. However, despite 2015 starting the year in a net short position of 8,700 ounces (-0.3 t), by year-end, net positions rose by 18,400 ounces (0.6 t), to a long of 9,800 ounces (0.3 t). This was solely a result of the significant pick up in net long positions from late May to end-July, driven by a 21% fall in the palladium price, which resulted in net long positions reaching their highest level since August 2013.

CFTC reports on managed money positions on NYMEX, which include both futures and options, provide a good proxy for investor activity on the exchange. Looking to platinum in 2015, by year-end, net long managed money positions had fallen by 49% to reach 0.5 Moz (14 t), reversing the moderate increase in net long positions recorded in 2014, demonstrating the negative investor sentiment felt towards the metal last year. By the end of the first quarter of 2015, net long positions had declined by 184%, driven by long liquidation. However, as the year went on, fears over a slowdown in global economic growth saw investors, in anticipation of lower prices, pile back into short positions. By 21th July, short positions had reached 1.5 Moz (47.5 t), their highest level in our records. In the final quarter of the year, despite a brief recovery in the platinum price in October, net investor long positions entered a decline once again, falling to a low of 0.25 Moz (8 t) by 24th November, dragging down platinum prices to their lowest levels since 2009. Meanwhile, similar to platinum, net long positions for palladium declined in 2015, falling by 44% or 1 Moz (35.1 t) to 0.87 Moz (27.0 t) driven largely by a build up in short positions, with net longs reaching their lowest level since August 2012.

Platinum Palladium (000 ounces) 2012 2013 2014 2015 Change 2012 2013 2014 2015 Change

Retail Investment 282 141 131 474 262% 37 38 45 45 -1.1%

Exchange Traded Funds 239 892 218 (260) n/a 448 0.1 899 (727) n/a

TotalIdentifiableInvestment 521 1,033 349 214 -39% 485 38 944 (683) n/a

IndicativeValue$M** 809 1,536 483 225 -53% 313 28 758 (472) n/a

*Excludes investment activity in the futures and OTC markets.

**Indicative value calculated using annual average volume and prices.


IdENTIFIABLE INvESTMENT*

15

Inv

estmen

t


Total volumes on the ShanghaiGoldExchange (SGE) declined by 12% to 0.96 Moz (30.1 t) last year. The decrease was driven by weakening economic sentiment. Additionally, investors were concerned about the 17% vAT on platinum that is applied on trading through SGE, which made investors turn to alternative trading channels. Information received from members of the SGE that are involved in platinum trading, along with our own field research, confirms that the overwhelming majority of the trading on the SGE is related to the sourcing of metals for industrial and jewellery fabrication.

Retail investment

The vast majority of investment in physical platinum and palladium bullion products has historically been concentrated in two countries, namely Japan and the United States. Looking at Japan first, physical investment for platinum jumped more than 8-fold from 2014 levels to an estimated 390,000 ounces (12.1 t) in 2015, the highest level on record. Japan is currently the world’s largest retail market for platinum investment, accounting for 82% of the total in 2015. The main driver for the surge in investment was platinum’s continued price weakness, with the annual average platinum price in yen terms falling by 13% year-on-year, recording a six year low on 11th december. It was reported that when new price lows were reached throughout the year, investors could be seen lining up outside retail stores in search of platinum bars.

In NorthAmerica, platinum retail investment increased by 10% year-on-year to an estimated 55,000 ounces (1.7 t). Investment demand for platinum has waned considerably since 2012 as the price has continued to perform poorly, leading to disenfranchisement amongst speculators. However, unlike in 2014 when some investors switched their exposure from platinum to palladium, fuelled by the metal’s attractive supply/demand fundamentals and higher price expectations. The decoupling of palladium from its fundamentals in 2015, where palladium’s price performance was largely driven by the precious metals complex as a whole, resulted in palladium retail

investment demand remaining flat year-on-year. Instead, much of platinum’s increase in demand was driven this year by platinum coins.

Physical investment in Europe contracted for the fourth consecutive year in 2015, falling by 19% to 7,000 ounces (0.2 t), reaching its lowest level since 2006. Much of the weakness in this market, which is responsible for the smallest quantity of demand regionally, is a consequence of value Added Tax (vAT) which is levied on sales of bars and coins, therefore investment in this region in mainly in the form of vAT-exempt metal accounts. In China, purchases of PGM bullion products remained limited last year, due to continued low awareness among the general public of PGMs as alternative investment vehicles, coupled with these bullion products’ high premia at the retail level.

In the coin sector, platinum demand soared by 52% in 2015 to 45,000, ounces (1.4 t), the highest sales levels since 2001. North America houses the primary investors for this market, although there is growing interest amongst European and Japanese investors for platinum coins. It is interesting to note that the surge in sales for platinum coins in 2015 took place despite the U.S. Mint not producing any platinum bullion coins during the year when they were the prime contributors of platinum coin sales back in 2001.

PLATINUM RETAIL INvESTMENT

-100

0

100

200

300

400

500

600

20142012201020082006

Thou

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(end-period; positive represents net longs) Platinum Palladium H1.14 H2.14 H1.15 H2.15 H1.14 H2.14 H1.15 H2.15

TOCOM Futures Contracts 28,374 29,607 38,644 27,932 746 (548) 906 608

- equivalent in ounces (000) 456 476 621 449 12 (9) 15 10

NYMEX Futures Contracts 35,944 17,898 9,363 9,052 19,941 19,970 10,237 8,690

- equivalent in ounces (000) 1,797 895 468 453 1,994 1,997 1,024 869

Source: TOCOM, CFTC

NET INvESTOR POSITIONS ON THE TOCOM ANd NYMEX

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Platinum, Palladium and rhodium ExchangE tradEd Funds

Platinum ETF holdings declined by 9% or over 260,000 ounces (8.1 t) in 2015 to 2.49 Moz (77.4 t) by year-end. Palladium ETF holdings shrank by 24% or over 727,000 ounces (22.6 t) to end the year at 2.34 Moz (72.9 t). In value terms, total holdings declined to $2.2 billion and $1.3 billion, a fall of 35% and 41% year-on-year for platinum and palladium respectively. Given the strong dollar and poor investment sentiment towards precious metals in 2015, a total of $252 million flowed out of platinum ETFs, while more than $477 million escaped palladium ETFs.

For palladium ETFs, the bulk of the loss was mainly attributed to ABSA’s NewPalladium fund which recorded a drop of 36% or more than 187,000 ounces (5.8 t). The second largest loss was seen in ETFS USA, which registered outflows of over 181,000 ounces (5.6 t), dropping by 25% year-on-year. Meanwhile, the largest palladium ETF fund, Standard Bank’s AfricaPalladium ETF registered a 13% outflow or over 92,000 ounces (2.9 t) last year, highlighting the weak investor sentiment towards palladium. After a net outflow in the first quarter of 2015, in which palladium ETFs fell by more than 158,000 ounces (4.9 t). The outcome of April’s Federal Open Market Committee meeting, in which expectations of a June interest rate rise were quelled, resulted in holdings of palladium increasing by over 60,000 ounces (1.9 t) by the end of the second quarter. However, in the second half of the year, with palladium’s price failing to hold above $700/oz, ETF holdings once again declined, falling by nearly 630,000 ounces (19.6 t).

Turning to platinum ETFs, and half of the decline in holdings last year was attributed to the largest platinum

ETF fund, ABSA’s NewPlatinum fund, which shrank by 14% or over 150,000 ounces (4.7 t). Other major funds including ETFS London & Australia and ETFS USA also registered double digit percentage losses. One specific fund worth noting is the Mitsubishi Platinum fund in Japan, which grew by a stunning 363% or over 68,000 ounces, ending the year at 87,000 ounces (2.7 t) to sit as the fifth largest platinum ETF.

Over the first quarter of 2015, more than 44,800 ounces (1.4 t) of platinum holdings were liquidated; however, this was swiftly reversed over the next two quarters, with platinum holdings enjoying a net inflow of nearly 23,545 ounces (0.7 t), over the period. In the final quarter of the year, an acceleration in the strength of the U.S. dollar resulted in platinum recording its lowest price since 2008, with total platinum holdings having registered a loss of over 307,000 ounces (9.5 t).

Total holdings in rhodium ETFs declined in 2015 to total 100,000 ounces (3.1 t) by year-end, with DB Physical Rhodium ETC fund accounting for almost all (99.5%) of the holdings. However, on 4th March this year, holdings from this previously dominant fund declined, falling by nearly 2,000 ounces (0.1 t). Interestingly, almost the same amount entered Standard Bank’s AfricaRhodium fund, whose holdings surged over 37,000 ounces (1.2 t) on 14th March. As a result, by the end of the first quarter, AfricaRhodium fund is responsible for nearly 40% of total ETF holdings.

PLATINUM ETF HOLDINGS

NET MOvEMENTS IN PLATINUM, PALLADIUM & RHODIUM ETFS

PALLADIUM ETF HOLDINGS

2014 2015 YoY% Jan-Apr* (000 ounces) 2016

Platinum 218 (260) n/a (14)

Palladium 899 (727) n/a (127)

Rhodium 3.9 (5.4) n/a (4.9)

*until 22nd April

Source: Respective issuers

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Julius Baer

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Price

*ETF Securities GLTR, WITE, Mitsubishi, DB Physical Palladium, iShares Physical Palladium ETC, Absa NewPalladium, Standard Bank Africa Palladium


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Sometimes the Most Valuable Commodity isn’t Platinum, Palladium or Rhodium Whatever your role, we provide more than information, we provide insight – truly relevant, accurate and timely news, forward-looking market analysis and research, exclusive fundamentals, and more. Using the tools and applications available in Thomson Reuters Eikon, you can grasp exactly where the market is and where it is likely to go – giving you the confidence to act.

OUR UNIQUE MARKET INSIGHT YOUR MOST VALUABLE COMMODITY

financial.tr.com/metals

© 2016 Thom

son Reuters. S034209 04/16.

REUTERS/Yuriko Nakao

S034209_v3.indd 1 29/04/2016 10:42

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4. Supply•Global refined platinum mine production rebounded

by 27% to total 6.16 Moz (191.5 t) in 2015, following the damaging 2014 strike in South Africa.

•Palladium mine production recovered by 9% last year to 6.71 Moz (208.8 t) thanks to a strong recovery from South Africa, partially offset by weaker Canadian output.

•Global Total Cash Costs (expressed in U.S. dollars) fell by 23% in 2015 to $932/PtEqoz, substantially aided by the tailwind of rand depreciation.

•Total Cash Costs + Sustaining Capex fell by 25% to an average of $1,048/PtEqoz, while All-in Costs (including writedowns) remained elevated at $1,534/PtEqoz.

MINE PRODUCTION

RHODIUM

GFMS’ Platinum Group Metals Survey 2016 marks the first GFMS publication including fundamental research on rhodium and a forecast is planned for release via Thomson Reuters Eikon later in the year. Rhodium production rebounded last year with the principal driver (as was the case for the other PGMs) being the return to a full year of mining operations in South Africa, following the five-month AMCU strike in 2014. South African output increased by 39% to total 624 koz (19.4 t), its highest level since 2011 and just 5% below the all-time

(000 ounces) 2013 2014 2015 Change

South Africa 2,432 2,008 2,653 32%

Russia 2,527 2,582 2,575 0%

Canada 530 578 519 -10%

United States 404 401 406 1%

Zimbabwe 314 325 323 0%

Others 261 243 238 -2%

WorldTotal 6,468 6,136 6,713 9%


(000 ounces) 2013 2014 2015 Change

South Africa 4,368 3,220 4,522 40%

Russia 741 687 721 5%

Zimbabwe 409 398 398 0%

Canada 217 278 242 -13%


Others 156 154 152 -2%

WorldTotal 6,011 4,856 6,158 27%


WORld PlATinUM MinE PROdUCTiOn

WORld PAllAdiUM MinE PROdUCTiOn

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South Africa 599 449 624 39%

Russia 91 87 88 1%

Zimbabwe 35 36 35 -3%

Canada 24 22 24 9%


Others - - - -

WorldTotal 752 598 775 29%


WORld RhOdiUM MinE PROdUCTiOn

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high for South African supplies. This peak came three years later than that for platinum and has since tailed off less sharply. A key factor behind this relative resilience in rhodium output in recent years has been the gradual shift in ore blend to more UG2 reef, which typically has almost twice the concentration of rhodium than Merensky ore. Several economic factors including higher PGM grade and higher platinum proportions have meant that in preceding decades many Merensky occurrences were developed preferentially to UG2. As available reserves in many shafts’ Merensky areas have been depleted there have been several phases of mine planning that have favoured UG2 optimisation; not least in the mid-late 2000s when the rhodium price drove to its all-time-high. The increase in South African supplies accounted for 99% of the global increase last year, with fractionally higher output from Russia and north America, largely offset by lower output from Zimbabwe.

SOUTH AfRICA

South African platinum production rose by 40% last year, with palladium up by 32%. This led to South Africa becoming the world’s largest producer of palladium mine production last year; a position that may well be retained in 2016 but unlikely beyond, based on the GFMS forecast which assumes Russian output will recover. A strong 2015 production increase was always on the cards after the extraordinary industrial action in the first half of 2014 but the total surpassed GFMS’ forecast. Globally, of the ten largest gains at the mine level last year for platinum, nine came from mines that had been impacted by the AMCU strike, with the outsider being Booysendal north, also South African, which after commissioning in 2013 continued to ramp-up production. Of the strike-impacted mines, impala Rustenburg delivered the strongest improvement last year with more than double 2014’s platinum output and triple its palladium production.

Considering the extreme nature of South Africa’s 2014 output we would argue that in many ways 2013 offers a better year for comparison purposes: platinum and palladium output were 4% and 9% higher respectively in 2015. The strongest gains have been from Amplats’ Amandelbult Section (+65 koz or 2.0 t) of platinum, predominantly from the former Tumela shaft and from Mogalakwena (+52 koz or 1.6 t for platinum and more strongly for palladium), thanks largely to the start of the north concentrator debottlenecking project. northam’s Booysendal north project added 45 koz (1.4 t) compared with the 2013 figures.

A noteworthy outcome this year has been the remarkable resilience of the industry against mine closure, which has only occurred in a handful of isolated cases. it has been clear for some time that the industry would not make ‘knee-jerk’ decisions on mine closure for myriad reasons including the social implications, the high cost of restructuring itself and a reluctance to altruistically aid competitors. As a consequence a much broader focus has been on companies’ boards and management adopting progressively more stringent conditions to the approval of capital deployment. To this end both implats and lonmin guided spending reductions would reduce future production profiles during 2015. Care & maintenance announcements have in the main been nuanced, with the mothballing of certain workings within a shaft complex rather than ceasing operations outright. during the year impala announced plans to close the mechanised sections of impala 8# and 12#. Glencore announced the proposed suspension of the remaining decline at Eland in August, which was followed by Atlatsa’s announcement in September that its older, UM2 and Vertical Merensky shafts, would be mothballed at Bokoni with continuing production from its MPh and Brakfontein shafts.

South Africa’s government threw the domestic miners a temporary and inadvertent gift in early december when it was announced that respected Finance Minister nene would be replaced with the relatively unknown des van Rooyen. The markets’ response to this announcement was a 9.5% rand sell-off over three days, with the government counter response to reverse the decision and announce appointment of former Finance Minister Pravin Gordhan to the post. The government surprised again in mid-April 2016 with comments made by Mineral Resources Minister Zwane concerning an updated draft of South Africa’s Mining Charter, in which it was stipulated that a minimum 26% BEE ownership must be maintained in perpetuity. This is at odds with industry’s interpretation of “once empowered, always empowered” and has onerous ramifications if enacted.

SOUTh AFRiCAn MinE PROdUCTiOn

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MERGERS, ACQUISITIONS & RAISINGS IN THE PGM MINING SECTOR

After a quiet year for M&A in the PGM space in 2014, 2015 showed

substantial uplift in the number of deals tabled, if not completed.

in September 2015 Anglo American Platinum (Amplats) agreed

terms for the sale of its Rustenburg mines, concentrators and

tailings retreatment facility – operations that have played a central

role in Amplats’ (and previously JCi Corporation’s) dominant

producer position over the decades – to Sibanye Gold. Rustenburg’s

most recent round of restructuring has been underway since 2013

and its exit from Amplats’ portfolio has been on the cards for over

a year, with a handful of other non-core assets still on the table.

Sibanye followed this move in October 2015 by announcing a bid

to acquire Aquarius Platinum at a near-60% premium to Aquarius’

share price at the time; the bid was unanimously recommended

by Aquarius’ board and the transaction completed in March 2016.

This action followed speculation in recent years that Aquarius

could bid for the Siphumelele mine; as Siphumelele is situated

down-dip to the Kroondal pool & share joint venture. Control of

both assets would enable mining into one mine’s reserves from the

other’s infrastructure, extending the productive life of a combined

entity. Amplats’ 50% stake in Kroondal, which at its annual results

was highlighted as non-core, would remain as an enclave within

Sibanye’s ground, presupposing that the Sibanye acquisition of

Rustenburg goes through (which will require government approvals

and will likely be a lengthy process, potentially extending to the

end of 2016 or beyond). it would seem to us a logical further

consolidation opportunity for Sibanye to look to take full ownership

of Kroondal, provided terms can be agreed. Sibanye currently

holds the accolade of being South Africa’s largest gold producer.

Through the acquisitions underway, Sibanye Platinum is now likely

to become South Africa’s fourth-largest and the world’s fifth-largest

producer of mined PGMs.

Following northam’s landmark BEE transaction through its issuance

of 22% of new share capital to a special purpose vehicle named

Zambezi Platinum in 2014, the cashed-up company announced

its acquisition from Aquarius of the suspended Everest Mine, and

250ktpm UG2 concentrator plant for R400 million (approximately

USd 33 million) and the associated new order mining right for a

further R50 million (USd 4 million). The deal provides northam

with flexibility for its medium term plans to expand the footprint of

Booysendal, whose South lease lies immediately down-dip to the

Everest property.

On 2nd April 2015 norilsk nickel completed the first leg (Tati

nickel) of its African assets disposal (comprising both Tati and its

50% stake in nkomati) to Botswana’s state-controlled BCl limited

for $337 million. At the time of writing the nkomati transaction

awaits regulatory approval from the South African government.

Glencore plc’s shareholders voted to divest its minority 24% holding

in lonmin plc on 7th May which then took place as an in specie

distribution to the Glencore shareholder base. in Canada, presaging

the Mitsubishi Corporation’s recent announcement by its new CEO

to “shift away from commodities,” it made a tiny step last year

through the disposal of its 25% holding in the Marathon project to

the project’s manager, Stillwater Mining, for a total consideration of

$5.2 million.

A number of companies pursued equity capital raisings last

year in order to address requirements such as the need to fund

development or restucture debt at a time when depressed PGM

prices have left internal cash generation lean (or negative) and

balance sheet gearing exposed.

The most prominent of these included an announcement by impala

Platinum of a R4 billion rights issue in September to fund continued

development at its 20 and 16 shafts and later on 19th november

lonmin shareholders voted in favour of a more controversial raising

for $407 million, in order to restructure credit facilities. in order to

encourage shareholders to follow their rights, the new placement

involved a highly dilutive issuance of 46 new shares for each existing

share, followed by a 100:1 share consolidation. ivanhoe Mines, which

is developing the Platreef project made an announcement earlier

in the year that Zijin Mining Group would acquire a 9.9% stake in

ivanhoe through the issuance of new shares, for approximately

$82 million.

Subsequent to year-end Boliden reinforced its already extensive

nordic portfolio of assets with the proposed acquisition of the

Kevitsa ni-Cu-PGM mine in Finland from First Quantum Minerals,

for a consideration of $712 million and with a targeted completion

date of May 2016.

Vendor Acquirer Asset Transaction Value InitialDate Completion

First Quantum Minerals ltd Boliden AB Kevitsa Sale $712M 10/03/2016 Outstanding

lonmin plc Shareholder base n/a Rights issue $410M 19/11/2015 11/12/2015

OJSC MMC norilsk nickel BCl limited Tati & nkomati 1 Sale $337M 14/10/2014 02/04/2015

Anglo American Platinum ltd Sibanye Gold Rustenburg Section Sale $341M 2 09/09/2015 Outstanding

Glencore plc Shareholder base 23.9% of lonmin plc distribution in Specie $298M 11/02/2015 07/05/2015

impala Platinum holdings ltd Shareholder base n/a Rights issue $296M 06/10/2015 07/10/20151 50% nkomati sale still pending 2 Upfront and deferred payment Source: Company Reports; GFMS, Thomson Reuters

TOP 6 PGM TRAnSACTiOnS in 2015-16 (YTd)

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Russia

Russia’s production of mined platinum, palladium and rhodium stood at 0.72 Moz (22.4 t), 2.58 Moz (80.1 t) and, GFMS estimates, 88 koz (2.7 t) respectively. Palladium output from Russian mines was essentially flat in 2015. This apparently level outcome disguised production variance during the year: production of PGMs from domestic operations was moderately higher in the first six months of 2015 but this was followed by a reduction in throughput in the second half of the year as the company commenced the reconfiguration of its processing capacity. Rhodium production is estimated to have remained steady (at relatively elevated levels) last year as the company continued to process accumulated stocks of PGM-rich pyrrhotite concentrates for much of 2015. Long-standing plans to retire Norilsk’s original Nickel Plant (after more than 70 years of operation) are now underway, primarily to improve Norilsk City’s environmental footprint, in particular with a view to reducing the emissions of sulphur dioxide from pyrometallurgical processes. Norilsk has indicated that production is expected to contract in 2016 as a function of downstream processing constraints and in anticipation of a production shortfall built up its metal inventories, including PGMs.

Platinum production from Russia increased by 5% last year. This was a function of firmer production from the alluvial sector. Having been impeded by equipment availability issues in 2014, the country’s largest alluvial operation, Kondyor in Khabarovsk Krai, posted an increase of almost one-third in 2015, albeit with production yet to return to budgeted levels. We estimate that output from the smaller alluvial operations in the Kamchatka and Ural regions decreased last year.

NORTH aMERiCa

The majority of Canadian PGMs are extracted as co-products from nickel-copper mines. Canadian production of platinum and palladium decreased by 13% and 10% last year, with moderately lower output being a theme across several of the Canadian producers. Vale’s reported group sales of platinum and palladium from all sources were, in aggregate, 15% lower year-on-year. Stripping out an allowance for third party feeds, GFMS estimates that Vale’s production also saw own production from its Sudbury operations decrease by double-digits in percentage terms. 2015 saw the first ever reporting of PGM production data from Glencore’s Canadian nickel assets, which showed a 7% drop in platinum and a 5% rise in palladium output. Commentary on the operations was not provided, but the disclosure enabled a re-statement of GFMS data with higher figures than were previously accounted for in our 2014 estimate.

Production from Canada’s sole primary PGM mine, Lac des Iles decreased year-on-year. Payable palladium fell by 5% to 0.16 Moz (5.2 t). This weaker production belies a strong third quarter which was more than offset

RUSSIaN MINe PRodUCTIoN

Rank Output (000 ounces) 2014 2015 Company 2014 2015

1 1 anglo american Platinum Ltd. 1 1,324 1,837

3 2 Impala Platinum Holdings Ltd 2 661 1,039

4 3 Lonmin plc. 3 454 755

2 4 oJSC MMC Norilsk Nickel 662 656

5 5 Northam Platinum Ltd. 4 208 223

6 6 aquarius Platinum Ltd. 188 197

8 7 Glencore plc. 173 158

9 8 aRM Platinum 163 158

7 9 Vale S.a. 5 182 154

11 10 Stillwater Mining Co. 118 118 1 Refined production from mining operations 3 Calendar year refined sales; 4 estimated saleable metal in concentrate Source: GFMS, Thomson Reuters

ToP 10 PLaTINUM PRodUCING CoMPaNIeS

Rank Output (000 ounces) 2014 2015 Company 2014 2015

1 1 oJSC MMC Norilsk Nickel 2,752 2,689

2 2 anglo american Platinum Ltd. 1 921 1,238

3 3 Impala Platinum Holdings Ltd 2 441 621

4 4 Stillwater Mining Co. 400 403

6 5 Lonmin plc. 3 232 342

5 6 Vale S.a. 5 398 341

7 7 Glencore plc. 199 202

8 8 North american Palladium Ltd. 174 167

9 9 aRM Platinum 166 158

10 10 aquarius Platinum Ltd. 113 119 2 attributable mine production including Zimplats 5 Including custom feeds

ToP 10 PaLLadIUM PRodUCING CoMPaNIeS

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by operational and business-related challenges in the second and fourth quarters. in Q2 a process water discharge necessitated concerted tailings management and a temporary cessation of milling, for 50 days. during Q4, in response to persistently lower palladium prices north American Palladium announced a headcount reduction of approximately 10% at the mine, halted the processing of lower grade mill feeds and shifted its milling activities from continuous to a two-weeks-on/two-weeks-off schedule.

Mine production from the United States was marginally higher last year with platinum and palladium posting respective increases of 3% and 1%. At the country’s largest PGM producer, Stillwater Mining’s namesake operation, mined production of both platinum and palladium fell by 6% in 2015. in the face of lower metals prices the company made the decision to suspend production activities at certain high-cost workings and over the course of 2015 reduced its Montana workforce by 11%. Compounding the effects of these production decisions the operation underwent a maintenance shutdown of the concentrator, crusher and production hoist, which at the latter required additional downtime. East Boulder, on the other hand, recorded output gains of more than 10% for both metals thanks to additional mined volumes from the Graham Creek project. Stillwater announced that in late december and January the company reached new four-year labour agreements at the two mines. Meanwhile, lundin Mining’s Eagle ni-Cu mine in Upper Michigan saw out its first full year of production, delivering above-budget base metal output and, we believe, concomitantly higher PGMs.

ZIMbAbwE

PGM production in Zimbabwe was essentially flat in 2015, with platinum output steady and palladium and

rhodium each just over 1,000 ounces lower. Production at ngezi suffered as a result of the remediation activities at Bimha mine following the major (fatality-free) fall-of-ground event on 8th July 2014, which rendered 50% of the working areas of that portal inaccessible. Associated remediation will take several years but the 2015 production drop was compensated by a redeployment of mobile machinery to other portals, coupled with a re-start of production from the ngezi South pit. An additional challenge was presented in May 2015 when a furnace leak occurred at the Selous Metallurgical Complex; associated smelter downtime skewed production to the second half of the year, with some concentrate stock built up for smelting in 2016.

Government pressure on industry to progress solutions to deliver additional domestic beneficiation of PGMs persisted over the year, although relaxation to a 15% export levy was made clear to producers in July 2015. This tariff was, in principle, in place during the first half of the year. This period of uncertainty coincided with Unki accumulating concentrate stocks, but despite this both Unki and Mimosa posted modestly higher production in 2015) albeit loaded to the back end of the year.

OTHER COUNTRIES

Among the group of ‘other countries’, platinum and palladium production decreased marginally. Output from Kevitsa in Finland had reached steady state operations in 2014 and recorded a slight dip in recovered precious metals in the middle of 2015. We estimate that PGM output from another primary nickel producer, Tati in Botswana, fell last year and in the first quarter of 2016 comments attributed to the Botswana Miners Workers Union highlighted that its contract mining workforce was at imminent risk of redundancy.

nORTh AMERiCAn MinE PROdUCTiOn ZiMBABWEAn MinE PROdUCTiOn

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PRODUCTION COSTS

— Global average Total Cash Costs expressed in dollars decreased by 23% to $932/platinum equivalent ounce (PtEqoz). — The downward trend in part reflects the unusual conditions during strike-affected 2014. — Producers also gained from macroeconomic tailwinds in the form of currency depreciation and lower oil prices. — Global All-in Costs fell by 9% to $1,534/PtEqoz.

in some respects, 2015 could be described as a return to normality for producers, after the South-African dominated industry was severely impacted by the protracted strike action of 2014. The global cost curves below illustrate fairly dramatic divergence between 2014 and 2015; last year, the Total Cash Cost decreased by 23% to $932/PtEqoz.

The reductions in production costs that would be expected on the resumption of normal throughput volumes were enhanced by other factors, chiefly a macroeconomic backdrop of weakening producer currencies and falling oil prices, as well as ongoing cost-containment measures undertaken by producers. however, despite the substantial falls in production costs, producer margins (on a Total Cash Cost plus sustaining capex basis) continued to contract, thanks to decreasing metal prices.

All of the main PGM-producing regions experienced falls in average Total Cash Costs last year. in South Africa, the source of 82% of costed production during 2015 on

a platinum-equivalent basis, average Total Cash Costs fell by 27%. While the return to normal production levels after the five-month strike in 2014 was an important part of this, producers also benefited greatly from rand depreciation over the period. By contrast, in Zimbabwe, where the U.S. dollar was adopted for use as the main currency in 2009, producers are not in a position to benefit from currency weakness against the U.S. dollar. Consequently, Total Cash Costs fell by only 2% last year.

The average All-in Cost, which includes all cash and non-cash costs, sustaining capital expenditures, indirect costs and overheads, fell to $1,534/PtEqoz in 2015, an 8% decrease. This figure reflects the impact of a number of non-cash asset impairments, including those charged on Marikana and the Rustenburg mines.

This analysis excludes norilsk nickel, which produces large quantities of platinum and palladium as co-products of its nickel-copper mining activities in Russia. This exclusion is undertaken in order to avoid distortion to the cost statistics. inclusion of norilsk’s Russian assets would have the effect of dragging the 2015 Total Cash Cost down to $696/PtEqoz.

WORld PlATinUM EQUiVAlEnT TOTAl CASh COST And All-in COST CURVES

2014 2015 Change

north America 938 747 -20%

South Africa 1,286 944 -27%

Zimbabwe 978 955 -2%

Russia 475 390 -18%

World* 1,215 932 -23%

*Excluding Russia


TOTAl CASh COSTS PER EQUiVAlEnT OUnCE (US$)

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YEAR-ON-YEAR COST CHANGES

Based on detailed mine-by-mine analysis in Thomson Reuters’ PGM Mine Economics Service, estimates of the main cost drivers of mine production can be isolated and quantified, in the form of a year-on-year variance analysis. These are presented here on a $/PtEqoz basis, and reflects platinum equivalent production of recoverable metal in concentrate for our global population of primary PGM mines.

The first step in this process is to quantify and strip out the effects of exchangerate changes, by calculating the extent to which mine site costs would have changed from one year to the next in dollar terms, were exchange rates the only driving factor. The chart overleaf illustrates the extent to which PGM producer currencies have weakened against the U.S. dollar over the past two years (it should be noted that norilsk’s Russian operations are excluded from this variance analysis). during 2015, exchange rates were the single most significant driver of producer costs, providing $144/PtEqoz of downward pressure on the average Total Cash Cost. Given that supply is predominantly from South African operations, this component of the variance analysis primarily reflects the impact of rand depreciation.

Second in magnitude to exchange rates in terms of effect on producer costs during 2015 was the miscellaneouscategory, which acts as a “catch-all” for a number of factors that cannot be satisfactorily disaggregated through the variance analysis. This includes metal production volumes and prices, as well as specific consumables and maintenance costs and the costs of maintaining plant and equipment during strikes. during 2015, $116/PtEqoz of the overall reduction in Total Cash Costs was attributable to the miscellaneous category.

This incorporates the marginal effects of co-product metal price trends, which in 2015 were downwards across the suite. Of greater importance were significantly higher production volumes as mines in South Africa returned to a full year of normal operating conditions following the 2014 strike.

Furthermore, the ongoing efficiency programmes undertaken by producers in order to minimise spending on consumables and optimise maintenance regimes also pushed costs downwards last year. For example, during the first six months of its 2016 fiscal year (ending June), implats had realised R112 million of operating cost savings through contract renegotiations and improved consumption, plus another R74 million saved through efficiency improvements.

Further downward pressure of $20/PtEqoz was provided by lower smeltingandrefining costs last year. Although there is a large fixed cost component to smelting and refining, the higher volumes processed during 2015 led to a cost reduction on a dollar per ounce basis. in some cases, such as at Marikana, producers kept smelters running during the 2014 strike in order to enable swift ramp-up to normal operations. This contributed to the relatively high smelting and refining unit costs during 2014, and a consequent substantial drop when normal operating conditions returned during 2015. Amplats placed an emphasis on process efficiencies, stability and maintenance at its smelter operations during 2015, with the result that its Polokwane smelter treated record concentrate volumes during the year. higher smelting costs in absolute terms at Amplats’ operations were largely due to above-inflation increases in power costs (not disaggregated within the smelting and refining category). however, on a per-ounce basis, higher treated volumes outweighed the effects of cost inflation.

2015 PlATinUM EQUiVAlEnT All-in COST CURVE*

Source: GFMS, Thomson Reuters *Excludes extraordinary non-cash items, for scaling purposes.

U.S

.$/P

tEqo

z

2000

0

500

1000

1500

0 20 40 50 60 70 803010 90 100Cumulative Production (%)

Depreciation & Amortisation

Sustaining Capex, Indirect Costs & Corporate Overheads

Total Cash Costs

Conventional

Mechanised

Surface

25

Sup

ply


lower fuel costs contributed a $14/PtEqoz reduction to Total Cash Costs last year. This cost saving is perhaps unsurprising given the dramatic fall in global oil prices during 2015. Focusing on production from open pit mines, for which the fuel component is far more significant, output increased in absolute terms during 2015, on higher volume from Mogalakwena. however, as a proportion of total costed production, the contribution from surface operations fell from 16% to 13% year-on-year, as the strike-affected underground operations ramped back up to full capacity.

Royalties provided $8/PtEqoz of downward pressure on costs during 2015. Generally, royalties were lower on lower profitability (although some South African producers had already seen their royalties drop to the minimum level of 0.5% of gross revenue prior to 2015).

having featured as one of the primary drivers behind the variance in producer costs over the last few years, labourcosts contributed a relatively modest $14/PtEqoz of upward pressure during 2015. The three-year wage agreement entered into during 2014 by lonmin, implats and Anglo American Platinum committed the companies

to annual increases of 7.5-8%, or greater for those earning below R12,500/month. These increases were somewhat mitigated by headcount reductions at various operations. For example, Amplats cut 3,775 employees during the year, while Atlatsa reduced both employee and contractor headcount as part of the restructuring of its Bokoni operation.

Power costs also remained a headwind for producers last year, adding $5/PtEqoz to production costs. This was overwhelmingly driven by electricity tariff increases imposed on South African operators by Eskom under the nERSA Multi Year Price determination 3, which commenced in 2013 and runs for 5 years. in October 2014, nERSA approved Eskom’s implementation plan relating to recoupment of revenue under-recovered over the 2010-2013 period, with the result that operators in South Africa saw a 12.7% tariff increase, effective from April 2015.

AVERAGE MARGinS (PRiMARY PGM MinES)US$ AGAinST PGM PROdUCERS’ CURREnCiES

PlATinUM EQUiVAlEnT TOTAl CASh COST VARiAnCE AnAlYSiS

2014 2015 Change

SouthAfrica(annualaveragesin000rand/kg)

TCC + Sustaining Capex 494 420 -15%

Revenue Realised 470 428 -9%

Margin -23 8 n/a

US$:Rand 10.83 12.77 18%

NorthAmerica(annualaveragesinUS$/PtEqoz)

TCC + Sustaining Capex 1,137 893 -21%

Revenue Realised 1,386 1,059 -24%

Margin 249 166 -33%

Zimbabwe(annualaveragesinUS$/PtEqoz)

TCC + Sustaining Capex 1,106 1,076 -3%

Revenue Realised 1,388 1,060 -24%

Margin 282 -16 n/a


U.S

.$/P

tEqo

z


750

850

950

1050

1150

1250

Pow

er

Labo

ur

Roy

altie

s

Smel

ting

&R

efini

ng

Fuel

Mis

cella

neou

s

1,215

+14+5

-8

-144

-14-20

-116

2014 2015

932

Exch

ange

rate

s

80

100

120

140

160

180

Jan-16Jul-15Jan-15Jul-14Jan-14

Inde

x, 2

nd Ja

nuar

y 20

14 =

100


Canadian dollar

South African Rand

26

Sup

ply

GFMS PlatinuM GrouP MetalS Survey 2016

AutocAtAlyst Recycling

— Last year autocatalyst scrap recycling recorded its second biggest drop in the case of platinum and its single biggest decline for palladium since the start of our series in 1999.

In 2015 platinum scrap fell by an estimated 14% to 0.93 Moz (28.9 t) and palladium scrap dropped 11% to 1.6 Moz (49.9 t). Rhodium fell 12% to 0.28 Moz (8.8 t). The decline was particularly severe in North America and Europe where platinum autocatalyst scrap recycling rates fell an estimated 17% and 25% to 0.35 Moz (10.9 t) and 0.32 Moz (10.1 t) respectively. Palladium volumes from autocatalyst recycling followed a similar trend falling by 16% in each to 0.95 Moz (29.4 t) and 0.33 Moz (10.3 t) respectively. Rhodium recycling in turn fell by 22% and 19% to 0.11 Moz (3.5 t) and 0.07 Moz (2.1 t) respectively.

In a study by Polk Company and the National Automobile Dealer Cars Association, the average scrappage rate of passenger cars in the United States was 92% of new sales over 2001-2013. For the most part, vehicle sales in developed regions are a good proxy for auto scrap rates, which in turn, with a lag, are a good indication of PGM autocatalyst recycling volumes. Light duty vehicle production in both North America and Europe recorded healthy gains last year, rising by 3.4% and 3.3% to 17.5 and 20.5 million units respectively, implying equally strong recycling volumes where the theory holds.

In any given year that might be the case but last year a different scenario unfolded, which was mainly a function of the drop in the steel price. Indeed, Shanghai carbon steel rebar futures, a good proxy for steel prices, have been under pressure for several years with the average price last year 57% below 2011. In previous years, vehicle owners received payment based on the value of the

raw materials in the car. With base and precious metals and steel prices all in the doldrums, the material flow through the recycling supply chain choked. Suddenly, vehicle owners had less incentive to scrap cars as the previous rewards had shifted to a cost. Scrapping a car came to require a capital outlay as opposed to a receipt. Further down the value chain, fewer cars were stripped for their valuables such as copper (wires and electronics), aluminium (frames and rims), lead (batteries) and other important items such as platinum, palladium and rhodium from autocatalysts. Particularly, scrapyards were not buying vehicles because the value of the material was below the cost of shredding. Only the scrapyards whose business model focused on dismantling and parts re-sale were still actively buying scrapped cars.

Another factor that contributed to the drop in recycling volumes was highlighted by a public study which found that in times of higher fuel prices, gas guzzling vehicles tend to get scrapped more whereas fuel efficient vehicles tend to rise in value as demand for them rises and they get scrapped less. In this case the contribution to the vehicle scrap rate can be determined by the composition of the vehicle fleet. Following the drop in the oil price, gasoline prices followed suit. This was reflected in consumer petrol prices at the pump which reduced the urgency to recycle larger less fuel efficient vehicles. We believe this factor also played a considerable role in reducing the vehicle scrap rate in North America, which utilises larger passenger vehicles than other regions.

With sales volumes rising in both North America and Europe and recycling volumes down, we estimate that the recycling rate as a function of new car sales has dropped considerably last year to a range of perhaps 65-70%. We don’t argue however that this relationship is broken, but, rather, quite the opposite. In fact, given the sharp drop in recycling volumes last year, we expect

GLObAL AUTOCATALyST RECyCLING

0

300

600

900

1200

1500

1800

201520142015201420152014

Thou

sand

Oun

ces


Platinum Palladium

China

Japan

Europe

North America

Other

Rhodium

TOTAL OPEN LOOP SCRAP ShARE OF TOTAL SUPPLy

0

20

40

60

80

100

20142012201020082006200420022000

%

Source: GFMS, Thomson Reuters; LMC

Ch5 - LV prod China

Rhodium Palladium Platinum

27

SUP

PLY


some of those pent-up stocks to be released to the market this year above and beyond the usual material flow, which is likely to push the pendulum to the other end of the spectrum. This hypothesis is further supported by the sharp change in the metals sentiment at the start of the year, where base and precious metals as well as steel prices recorded a significant increase in the first quarter. This might motivate some recyclers to release their accumulated material in anticipation of a correction in raw material prices following the rapid move up.

Elsewhere, in Japan we estimate that platinum autocatalyst recycling improved moderately by 3% reaching 0.07 Moz (2.0 t), whereas recycling rates for palladium autocatalysts fell 8% to 0.09 Moz (2.7 t). Rhodium remained flat at 0.04 Moz (1.4 t). Although platinum autocatalyst scrappage volumes were slightly up, this was not a true reflection of the underlying market and merely a function of material sourced from abroad. In Japan, 91% of total vehicle production was gasoline driven last year, which speaks to the country’s reliance on palladium- and rhodium-based aftertreatment formulations. Driven by a 6.2% drop in total (both light and heavy) vehicle production, palladium volumes retrieved from autocatalyst recycling fell in sync.

In China, where recovery rates are still relatively low, growth in all PGMs was robust last year, driven by the growing pool of available vehicles and a rising incentive to scrap older cars. Platinum autocatalyst recycling rose 20% to 0.04 Moz (1.1 t), whereas palladium and rhodium grew more rapidly, by 24% and 30%, respectively, reaching 0.1 Moz (3.0 t) and 3 Koz (0.1 t) last year. We understand that the recycling industry in China is still relatively underdeveloped with previously scrapped autocatalysts frequently finding their way back to European processing facilities. That however is changing with central and local governments alike vouching to

promote more value-added business domestically. International players have increasingly also stated their interest to get a foothold in the rapidly growing market, usually in joint-ventures. The government’s bold new five year plan has clearly shifted towards tackling pollution and its repeatedly expressed war on toxic emissions supports the need for more advanced recycling capabilities in a country with a vast pool of old vehicles. Previous incentives to get Euro 1 equivalent vehicles off the road were a good move, although less for PGM recycling due to the absence of significant PGM loadings. That, however, still leaves room for other cars adhering to previous standards to be scrapped.

Due to gasoline’s dominance in the Chinese vehicle market, palladium-loaded catalysts tend to come back in larger quantities compared to their platinum counterparts. However, similar to some other regions, old vehicles discarded in the major cities do not always immediately find their way into the recycling supply chain but are migrated inland, where the emissions legislation and compliance enforcement are less strict. We estimate recycling volumes for palladium autocatalyst scrap are 2-3 times higher than platinum and forecast this to rise.

Other Regions saw healthy gains for all three metals, rising by 11% and 20% to both 0.15 Moz (4.6 t) in the case of platinum and palladium and 15% to 0.06 Moz (1.8 t) in the case of rhodium. Many countries in this group don’t have the technological know-how to process autocatalyst scrap themselves but collect and pre-process in order to ship the material for refining to the international players in the region. Despite emissions legislation lagging the most modern standards in the developed world, standards are catching up. This means more PGM’s are needed on new vehicles and increasingly vehicles with higher PGM loadings are returning. On average, loadings are much lower, but large volumes add up.

AUTOCATALYST DEMAND AND AGE PROFILE

Thou

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2000

4000

6000

8000

10000

12000

20152012200920062003200019971994199119881985

Source: GFMS, Thomson Reuters (Johnson Matthey demand data for pre-1999)

0

2

4

6

8

10

12

Age Profile (%

)

AvailablePool 2018Available

Pool 2015

Age Profile of ELVs scrapped

Platinum

Palladium

Rhodium

28

Sup

ply

GFMS PlatinuM GrouP MetalS Survey 2016

JewelleRy scRAp supply

— Global platinum jewellery scrap rose 4% last year to reach its highest level since 2011 of 0.54 Moz (16.7 t), driven solely by a 21% surge in Chinese scrap supply. — Palladium jewellery scrap rose for the third consecutive year in 2015, by 7% to 0.26 Moz (8.3 t), the highest recorded scrap level in our records.

Global platinum jewellery scrap increased by 4% last year to reach 0.54 Moz (16.7 t), while the supply of palladium jewellery scrap rose by 7% to 0.26 Moz (8.3 t). For both metals, the sole driver in the increase in scrap supply was China. If we look to platinum, Chinese scrap in 2015 jumped up by 21% year-on-year to total 0.30 Moz (9.5 t), its highest level since 2008, contributing over half of total scrap supply last year. Japan, the second largest source of supply in this category after China, fell 12% in 2015, while a contraction in supply was also recorded in all other regions, namely North America, Europe and our “Other Regions” category.

Turning our attention to the key regions in more detail, platinum jewellery scrap from China has continued to accelerate over the last two years, overtaking Japan as the largest jewellery scrap contributor in 2014, after sharing top position in terms of global market share with Japan in 2013, (at 48% each). The surge in domestic demand arose due to several factors; firstly, the need to generate cash, as China’s poorer economy (which faced its slowest growth rate in 25 years last year), encouraged people to sell their hoardings, releasing more supplies into the market. Secondly, with newer more sophisticated designs of platinum jewellery available, consumers were coaxed into trading old pieces of jewellery for new. Thirdly, a rise in collection points and refineries capable of treating platinum scrap assisted in a more seamless collection system, encouraging scrapping.

Meanwhile, looking to Japan, the contraction in demand last year, which resulted in scrap supply at its lowest level since 2005 of 0.22 Moz (6.7 t), was driven by platinum’s average annual price in yen having plummeted by 13% on a year-on-year basis, significantly discouraging sales.

Scrap supply from North America contracted for the second consecutive year in 2015, falling by 30% to reach its lowest level since 2004 of 0.06 Moz (0.17 t). This fall in supply was attributed to an improving U.S. economy, in which fewer people felt the need to liquidate as unemployment levels fell and disposable incomes rose. While, the 26% tumble in the platinum price, further discouraged selling. Similarly looking to Europe, scrap

flows remain broadly unchanged over the year, falling by only 5% in a muted reaction to the 9% decline in euro denominated platinum prices.

The 7% increase in palladium scrap flows over 2015 saw the metal attain a new historical high of 0.27 Moz (8.3 t), despite falling palladium prices. For similar reasons to platinum, the growth in palladium scrap sales was driven by China alone, with Chinese supply increasing by 12% year-on-year to 0.22 Moz (6.8 t), the highest level on record. Indeed, palladium jewellery scrap supply is dominated by scrap sales in China, which now account for 83% of total supply. Meanwhile, it was North America that recorded the greatest fall in supply last year, declining by 19% to reach levels last witnessed in 2012, while Europe and Japan similarly recorded double-digit declines.

Above-gRound bullion stocks

— Platinum shifted to a broadly balanced physical market in 2015 leaving above-ground bullion stocks of platinum at 7.2 Moz (224 t) at end-year. — The drawdown of above-ground bullion stocks of palladium continued albeit at a slightly less dramatic pace last year, falling by 9% to 8.8 Moz (273 t).

Our supply/demand balances for platinum and palladium are designed to separate any distorting effect of flows from pre-existing above-ground stocks. Where we are able to identify such flows, these are shown separately as “below the line” items. Consequently, the arithmetical difference between our estimates of new supply (from mining and recycling) and fabrication demand, i.e. the physical surplus or deficit, represents our view of the underlying fundamentals of these metals. Where a physical surplus is reported, this indicates an excess of new supply over fabrication demand, implying

PLATINUM & PALLADIUM JEWELLERy SCRAP

0

200

400

600

800

1,000

20142012201020082006

Thou

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0

500

1,000

1,500

2,000

US$/oz


Platinum

Palladium

Platinum Price

Palladium Price

29

Sup

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gfms Platinum grouP metals survey 2016

a increase in above-ground stocks. Conversely, a physical deficit indicates a shortfall of new supply relative to fabrication demand. This implies an equivalent decline in above-ground stocks as this metal is called upon to redress that shortfall and satisfy fabrication needs.

We also attempt to quantify the broad scale of above-ground platinum and palladium bullion stocks. This includes stocks in the terminal markets, allocations to physically-backed ETFs and declared stock holdings on futures exchanges. In addition, we include an estimate for Russian government stocks of palladium and stocks of refined metal that may be held by industrial consumers and producers over and above normal levels.

plAtinum

Last year saw the platinum market shift to broad balance at the physical level after a hefty deficit in 2014. Crucial to this, unsurprisingly, was the sharp rebound in South African production aided by the absence of protracted strike action in that country, unlike in 2014. Our estimate of above-ground stocks at end-2015 is in the region of 7.2 Moz or 224 tonnes, of which more than 2.5 Moz (77 t) are ETF holdings, and is equivalent to eleven months’ fabrication demand.

The outflow from ETFs was the largest above-ground stock movement of platinum last year, and the largest ever annual drop for ETF holdings. As a result, ETF holdings fell as a percentage of above-ground stocks, from 38% to 35%, for the first time since their inception in 2007. Against this backdrop it is clear that there is a lack of tightness in the platinum market as the volume of above-ground stocks not held in ETFs rose in 2015 and as highlighted by low lease rates.

Last year also saw a small increase in industry stocks due to Norilsk Nickel’s reduction in platinum sales as it attempted to smooth sales in anticipation of lower output. Consequently, the company has stated that there has been a one-off allocation of saleable metal into its metal reserves. Our view is that this platinum will be released back into the market in 2016.

pAllAdium

For the ninth year in a row, the palladium market recorded a physical deficit in 2015, reaching 0.9 Moz (27 t). This was roughly a third smaller than a year earlier and the smallest deficit since 2011. This was due to markedly higher South African mine output, and pitiful Chinese jewellery demand and poor electronics offtake. That said, there has been a continued fall in above-ground palladium stocks, which are estimated to have dropped to 9.2 Moz (284 t) by end-2015, equal to roughly 11 months’ fabrication demand. It is interesting to note that the massive reduction in palladium ETF holdings means that the amount of above-ground stocks held outside ETFs dropped by a much more modest 140,000 ounces (4 t). In a similar vein to platinum, there was also an increase in industry stocks at Norilsk Nickel and we expect this metal to reach the market in 2016.

Overall, above-ground palladium stocks are still substantial and hence it is unsurprising that the market is not tight, as indicated by low lease rates. Stocks though are trending remorselessly downward as a result of a string of physical deficits this century, although this was somewhat obscured by releases from stocks long held off-market, from Russian government stocks. This ensured inventories in the terminal market were rising until 2011, since when they have dropped appreciably.

ESTIMATED MOvEMENTS IN STOCKS

PLATINUM (000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Industry Stocks 0 (200) (300) 665 0 (100) (300) (1,000) 1,300 (50)

Exchange Traded Funds 0 (194) (102) (384) (574) (145) (239) (892) (218) 260

Sub total - stock movements 0 (394) (402) 281 (574) (245) (539) (1,892) 1,082 210

Net Balance 334 (293) 126 896 (82) 317 (696) (1,415) 375 265

PALLADIUM (000 ounces)


Russia 1,550 900 1,280 1,100 800 800 400 200 0 0

Stillwater 63 0 0 0 0 0 0 0 0 0

Industry Stocks 0 0 0 0 0 (50) (100) (500) 600 (150)

Exchange Traded Funds 0 (280) (381) (507) (1,089) 532 (448) (0) (899) 727

Sub total - stock movements 1,613 620 899 593 (289) 1,282 (148) (300) (299) 577

Net Balance 1,803 324 366 577 (848) 1,072 (1,261) (1,326) (1,571) (290)


30

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Last year the UK exported 1.41 Moz (44 t) of platinum and

1.86 Moz (58 t) of palladium in bullion and sponge forms,

down 2% and up 4% respectively on 2014. Flows to the

United States were down by roughly half for both metals

compared to 2014 while the difference was made up by

larger shipments to Germany and an increasing amount of

platinum sent to Macedonia. The UK imported 0.87 Moz (27 t)

of platinum and 1.00 Moz (31 t) of palladium, up 5% and

45% respectively versus 2014. The large trade deficits can be

explained by UK consumption and drawdown in stock held

in the UK. Swiss total exports of platinum at 0.30 Moz (9 t)

and palladium at 0.24 Moz (8 t) were down 62% and 78%

respectively, while imports of platinum fell 37% to 0.43 Moz

(14 t) and palladium by 22% to 0.52 Moz (16 t). The dive

in trade through Switzerland comes as some of the main

consuming countries, like Germany, the U.S. and Hong Kong

take more metal direct from key producing countries, South

Africa and Russia.

Source: GFMS, Thomson Reuters; HMRC

Flows are calculated using the trade volumes and values

* UK also exported 0.16 Moz Pd to Switzerland

*Macedonia

Germany

0.18

United States

India

Japan

Hong Kong

South Korea

0.04

Argentina 0.03

South Africa 0.04

China

0.09

0.10

0.04

0.11

0.49

0.09

0.11

0.59

0.18

0.33

0.01

0.01

Platinum (Moz)

Palladium (Moz) Flow Direction

0.11

0.33

Ireland

0.03

0.06

0.08

Italy

0.05

0.03 0.31

0.11

MAJOR TRADE FLOWS IN PLATINUM AND PALLADIUM BULLION AND POWDER FROM THE UNITED KINGDOM IN 2015

Source: GFMS, Thomson Reuters; Swiss Impex

0.01

0.01

Platinum (Moz)

Palladium (Moz) Flow Direction

Germany

Hong Kong

0.04

0.07

0.04

0.14

Japan0.06

0.04

0.05

United States

0.04

UK

0.04

0.05

Flows are calculated using the trade volumes and values

Italy

MAJOR TRADE FLOWS IN PLATINUM AND PALLADIUM BULLION AND POWDER FROM SWITZERLAND IN 2015

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5. demand

•Global platinum demand jumped 6% in 2015 to a six year high of 7.57 Moz (235.5 t), as gains in autocatalyst demand and retail investment offset a drop in jewellery and industrial demand.

•Demand for platinum in autocatalyst applications increased 2% last year, with gains in Europe offsetting

weaker North American and Japanese demand.

•Platinum usage in glass and the other industrial segment increased last year, while petroleum, chemical and electronics all recorded an annual decline.

• Jewellery fabrication slipped 4% in 2015 to an estimated 2.46 Moz (76.4 t), led lower by a sizeable fall in China.

•Total palladium demand remained largely unchanged in 2015 to reach 9.45 Moz (294.0 t), as growth in the autocatalyst and chemical sectors offset falls elsewhere.

•Palladium autocatalyst demand rose 4% last year to a record high, pushed higher by uplift in most key markets.

•Electronics demand posted an 11% fall last year to a ten year low as weaker economic conditions limited.

platinum demand by region palladium demand by region

fabrication by region, 2006-2015

PLATINUM(000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

north america 1,414 1,425 1,119 845 915 1,032 1,042 1,088 1,134 1,103

europe 2,508 2,622 2,329 1,741 1,931 1,960 1,797 1,708 1,827 1,927

Japan 1,550 1,181 1,033 723 927 820 842 638 629 663

china 1,357 1,472 1,586 2,168 1,975 2,015 2,277 2,345 2,196 2,135

other regions 1,080 1,228 1,080 922 1,271 1,303 1,148 1,150 1,251 1,268

Total 7,909 7,929 7,147 6,400 7,019 7,130 7,106 6,929 7,036 7,096

PALLADIUM(000 ounces)

north america 2,238 2,311 2,040 1,591 1,978 2,027 2,311 2,312 2,300 2,339

europe 1,771 1,880 1,815 1,636 2,019 2,232 2,186 2,133 2,210 2,350

Japan 1,633 1,668 1,689 1,385 1,562 1,477 1,640 1,567 1,564 1,441

china 1,428 1,495 1,533 1,646 1,706 1,729 1,830 1,989 2,064 1,980

other regions 944 1,088 1,135 1,104 1,313 1,307 1,301 1,272 1,287 1,298

Total 8,013 8,443 8,211 7,362 8,577 8,773 9,267 9,273 9,424 9,407

RHODIUM(000 ounces)

north america 342 339 250 167 179 198 214 217 205 201

europe 224 326 314 268 267 297 252 239 230 227

Japan 225 241 236 155 192 153 145 140 103 102

china 19 22 61 78 103 101 117 130 154 151

other regions 182 243 229 193 239 227 177 187 144 146

Total 992 1,171 1,091 861 979 976 905 914 835 827

0

2000

4000

6000

8000

10000

20142012201020082006

thou

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china

Japan

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north america

other

Source: gfmS, thomson reuters

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6000

8000

10000

20142012201020082006

thou

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GFms platinum GROup mEtals suRvEy 2016

autocatalyst demand

platinum overview

Platinum is mainly used in diesel vehicle aftertreatment solutions. prior to 2010, platinum was the only metal used in light duty diesel vehicles to catalyse the oxidation of unburned hydrocarbons. reductions to sulphur content in diesel fuel enabled the introduction of palladium into diesel aftertreatment systems, replacing a portion of platinum loadings with palladium. the platinum-palladium ratio increased from below 1.0 in 2001 to as high as 5.5 in early 2009, which supporting incentives among automakers to focus on pgm costs. Since then, the premium has been in steady decline, having averaged 1.5 (platinum prices were $364/oz higher than palladium prices, on average) last year. despite this declining trend, the pressure to reduce costs has continued to drive autocatalyst manufacturers to substitute platinum with palladium.

last year, platinum consumption in autocatalyst applications rose by 2% to 3.0 moz (93.7 t). following the peak of 4.0 moz (125.9 t) in 2007, platinum demand came under severe pressure during the global financial crisis when global vehicle sales fell considerably.

Sentiment remains positive towards platinum’s demand prospects in this sector, but there are considerable regional differences in terms of performance. looking at the various vehicle groups on a global basis, platinum recorded an increase in the off-road sector (+24%) last year, albeit from an extremely low base, and in the light duty diesel segment (+5%), which represents 64% of total platinum demand in autocatalyst applications. the light duty gasoline (ldg) and on-road heavy duty diesel (Hdd) segment both recorded declines.

demand by region

When dissecting demand growth on a regional basis, the largest consuming region, representing 43% of total demand for platinum in autocatalysts last year, was Europe, which posted a solid 6% rise in demand to total 1.3 moz (41.9 t). Within europe, uptake for platinum was robust across the board ranging from the ldg segment to off-road applications. the one segment that dwarfed them all, however, was the light duty diesel (ldd) sector, which accounted for 84% of platinum demand in european autocatalyst applications, and increased by 6% to 1.1 moz last year. the main drivers of the increase in europe were robust vehicle production and rising average loadings. in spite of the shaky economic sentiment, light duty gasoline vehicles, which make up slightly more than half of the total light duty vehicle market, rose by 2%. However, their autocatalysts are palladium-intensive, which will be discussed in the

PLATINUM

(000 ounces) 2014 2015 Change

north america 499 461 -7.5%

europe 1,266 1,346 6.3%

Japan 278 271 -2.6%

china 241 240 -0.4%

other regions 673 693 3.0%

Total 2,957 3,011 1.8%

PALLADIUM


north america 1,663 1,746 5.0%

europe 1,617 1,788 10.6%

Japan 894 827 -7.4%

china 1,536 1,620 5.5%

other regions 892 906 1.6%

Total 6,602 6,888 4.3%


autocatalySt demand

pgm autocatalySt demand global veHicle production

0

1000

2000

3000

4000

5000

6000

7000

20142012201020082006

thou

sand

oun

ces


platinum

palladium

rhodium

0

20

40

60

80

100

20142012201020082006

vehi

cle

prod

uctio

n, in

cl. o

ff r

oad

(mill

ions

)

Source: gfmS, thomson reuters; lmc automotive

china

Japan

europe

north america

other

34

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palladium demand in autocatalyStS, 2015platinum demand in autocatalyStS, 2015

North America15%

Europe45%Japan

9%

China8%

Other23%

North America25%

Europe26%Japan

12%

China24%

Other13%

platinum in dieSel, 2015; regional demand

dieSel platinum demand

gaSoline platinum demand

palladium in gaSoline, 2015; regional demand

0

500

1000

1500

2000

2500

3000

3500

20142012201020082006

Thou

sand

Oun

ces

0

200

400

600

800

1000

1200

1400

20142012201020082006

Thou

sand

Oun

ces

North America13%

Europe53%

Japan6%

China7%

Other21%

North America27%

Europe19%

Japan13%

China27%

Other14%

dieSel palladium demand

0

200

400

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800

1000

20142012201020082006

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gaSoline palladium demand

0

1000

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4000

5000

6000

20142012201020082006

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All Charts Source: GFMS, Thomson Reuters OtherChinaJapanEuropeNorth America

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palladium section. the main reason for platinum’s solid performance therefore was the 5.1% rise in diesel vehicle production.

due to various tax advantages in many european countries, diesels account for a meaningful portion of the european vehicle fleet. large markets outside europe generally prefer gasoline-fuelled vehicles (this has been extended by local tax policies). technology has evolved considerably in recent years and, in spite of what some of the headlines and company statements suggest, the technology continues to get cleaner. in fact, with the latest aftertreatment systems installed, diesels are generally less polluting than gasoline vehicles and inherently more fuel efficient, emitting approximately 15% less co2 than its gasoline counterpart. therefore diesels are and will remain key for oems in meeting the fuel economy targets of 95 g/ km in europe by 2021.

the introduction of euro 6c next year will positively affect usage in diesels but only from 2016 onwards. the legislation will introduce a new testing procedure, whereby vehicles will be tested on their real driving emissions (rde) on the road as opposed to the more controlled laboratory environment. various stories about oems manipulating their test procedures, effectively underreporting their true emissions, have made headlines in recent months. independent studies by private and public agencies confirmed this suspicion.

therefore, the introduction of this new legislation is a huge improvement in narrowing the gap between test results and real emissions, which stands at an estimated 400% at present, according to the european commission. However, this legislation has been severely publicly criticised due to the presence of the nox conformity factor (cf) set at 2.1. in effect the cf allows new vehicles to emit 110% of the current euro 6 limits

during the introduction year of 2017, which actually corresponds more to euro 5 legislation. this is a step in the wrong direction, some argue. However, the cf will be tightened to 1.5 (50%) by 2020.

more tangible progress has been recorded at reducing co2 emissions, which fell from 186 g/km in 1995 to 119 g/ km last year. these are levels that only new vehicles achieve, which last year accounted for 5% of the total european vehicle fleet. in addition, on average vehicles on the road are ten years old and rising. unsurprisingly, therefore, emissions from the transport sector are not declining. in order to achieve this, however, a more holistic approach is required combining a range of options such as a wider use of alternative powertrains, biofuels, hybrid or full electric, faster fleet renewals, intelligent transport systems (itS), improving road infrastructure, or altering driver behaviour.

platinum demand in autocatalysts also rose in OtherRegions, by 3% to reach 0.7 moz (21.6 t). this region consists of a host of countries, of which india is the most prominent. last year, india sold 7% more vehicles, or 2.5 million in total, of which just under half were diesels. this share is considerably higher compared to north america, Japan or china, which have diesel ratios of 6%, 11% and 7% respectively. india’s government is now planning to implement the bharat Stage (bS) vi emissions standard in 2020 from bS iv, leapfrogging bS v. this decision is ambitious, given that the current nationwide standard is still bS iii. in order to achieve this standard, ultra low sulphur fuel needs to be readily available throughout the country, something that is lacking at present. nevertheless, at some point in the near future, the move will have a further positive effect on platinum demand from our other region.

autocatalySt demand: europe european ligHt duty veHicle production

0

500

1000

1500

2000

2500

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Platinum

Palladium

Rhodium

0

5

10

15

20

25

20142012201020082006

Ligh

t Dut

y Ve

hicl

e Pr

oduc

tion

(mill

ions

)

Source: GFMS, Thomson Reuters; LMC Automotive

Diesel

Gasoline

36

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on the other hand, demand for platinum in autocatalyst applications in NorthAmerica fell by 7.5% to 0.46 moz (14.4 t). a rise of platinum offtake in the ldd segment was offset by a drop in the ldg and Hdv applications, which suffered from continued palladium substitution and thrifting, respectively. the vW diesel scandal did hamper ldd sales at year-end but not enough to offset the rise in platinum demand. vW faces various lawsuits from over multiple countries. an acceptable solution to the recall procedure of the affected engines in the united States has not been reached. therefore, spillover effects of “dieselgate” are likely to be felt this year.

north america has always been at the forefront of emissions legislation and has the tightest global standards. this stringency effects average vehicle loadings, which we estimate to be considerably higher compared to those in europe. that, however, is also a function of the difference in catalyst size, which is a function of the engine size, which in turn is a reflection of the vehicle size. vehicles for the north american market are larger than those in europe or Japan, supporting the use of higher pgm loadings in their autocatalysts.

Japan witnessed a contraction of platinum usage in autocatalyst of 2.6% reaching 0.27 moz (8.4 t) in 2015. contrary to europe, platinum demand is strongest in gasoline driven vehicles, which make up 90% of light duty vehicle demand. light duty gasoline vehicle sales posted an 8% decline last year, driven by the challenging economic backdrop. this trend was accompanied by a decline in production and sales volumes of on-road and off-road applications, also heavy users of platinum in their aftertreatment solutions. the ldd sector witnessed a modest increase, which curbed the overall decline.

a similar trend has been observed in China where demand for platinum in autocatalyst applications contracted by 0.4% to total 0.24 moz (7.5 t). Similar to Japan and north america, china is predominantly a gasoline market, where diesels have yet to develop a significant rise in popularity. emissions legislation is lagging that of europe and north america and repeated efforts to introduce new stages have frequently been delayed due to fuel quality issues. china implemented china 5 last year in the major cities and is planning a nationwide rollout by 2018. this expansion will have a positive effect on pgms use in the country, which is suffering from excessive levels of pollution. tackling this issue, however, has proven to be difficult; introducing new legislation is one thing, however, ensuring compliance another.

demand from the heavy duty market

platinum demand from heavy duty applications has been steadily trending upward since 2010, rising by an average 21% per annum over the 2010-2014 period. in 2015, however, demand slightly contracted, by 0.7%, driven by a drop in vehicle production from north america and Japan. in the case of the former, in spite of a healthy recovering economy, the industrial, manufacturing and

autocatalySt demand: nortH america

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Palladium

Rhodium

nortH america medium & Heavy duty veHicle production uS domeStic paSSenger car SaleS

0

300

600

900

1200

1500

20142012201020082006

Hea

vy D

uty

Vehi

cle

Sale

s ‘0

00s

Source: LMC Automotive; KGP Automotive

On road HDV

Non Road Mobile Machinery


Gasoline94%

Diesel6% Electric

(incl fuel cells)0%

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transport sectors have all been experiencing sluggish business activity. new Hdv orders in Japan have similarly experienced a slowdown due to sluggish domestic economy and increased competition from abroad.

europe was able to pick up some of the slack, but unable to counter the trend overall. continued healthy rising activity from china and the other regions category for heavy trucks and buses buoyed vehicle production, but the majority of countries in these regions have very little pgm-containing emissions aftertreatment installed. for example, 84% of heavy duty vehicles produced in north america last year had the most advanced emissions cleaning systems, comprised of exhaust gas recirculation (egr), Selective catalytic reduction (Scr), a diesel oxidation catalyst (doc) and a diesel particulate filter (dpf).

a doc has platinum and in some cases palladium loaded and so does a dpf, although considerably less than that of a doc. an Scr in many cases has very little platinum in the ammonia slip catalyst, which often, but not always, is added to the Scr. the filter size increases with engine size and so those fitted to Hdv are considerably larger compared to ldv. Half of 2015 global Hdv engines had displacements of between 5-10 litre which we categorise as medium. large engines, between 10-15 litre, made up around 33% and the remaining 15% were small engines with an engine displacement of <5 litre.

china and or our other region category, which accounted for 29% and 27% of on road Hdv production last year, tackled their emissions for the overriding majority, i.e. around 75%, with no aftertreatment or an Scr only; none of which contain any meaningful levels of pgms. Japan and europe, on the other hand, have a variety of aftertreatments installed such as egr, doc and dpf and some solutions using Scr only. in general,

therefore, half of the Hdvs sold last year had some sort of aftertreatment installed whereas the other half relied either on Scr alone or no aftertreatment at all.

in a similar vein, global off-road vehicles had no aftertreatment installed for 70% of the total last year. unsurprisingly this was led by china and our other regions category, which subsequently translated to very low levels of platinum and palladium demand from these regions. in europe and Japan, 40% of off-road vehicles had no aftertreatment installed, with the rest stretching over a combination of egr, doc and dpf in the case of Japan, and some forms of Scrs as well in europe. about 75% of vehicles in north america had a wide range of aftertreatment solutions installed whereas only one quarter of vehicles had no catalysts. as such, while china produced more than three times as many off-road machines last year than north america, using 0.13 moz (0.4 t) of platinum, north american platinum demand from this segment was 50% higher.

With the european commission approving the introduction of stage v in 2020, covering all engines used in machines ranging from small handheld equipment, such as lawn mowers and chain saws, to large agricultural and farming machinery, such as harvesters and cultivators, and the incentive of the developed world to harmonise their emissions legislation, both off-road and the on-road Hdd segment remain major growth areas for pgm demand.

palladium overview

at 75% of global vehicle production, ldg powered vehicles dominate the auto market (ldd made up 19% in 2015). in countries with advanced emissions legislation, vehicles are usually fitted with a three-way-catalysts; a far less complex formulation compared to ldd.

autocatalySt demand: Japan

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cHineSe ligHt duty veHicle production

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25

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Source: GFMS, Thomson Reuters; LMC

Ch5 - LV prod China

Gasoline

Diesel

Off road HDD

On road HDD

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globally, palladium-intensive catalysts account for 85% of the gasoline vehicle market. at more than double the size of platinum, palladium demand stood at 6.88 moz (214.2 t) last year representing an increase of 4.3%. all regions but Japan recorded healthy gains, with europe leading the way and rising 10.6% to total 1.79 moz (55.6 t) closely followed by china, rising 5.5% to 1.62 moz (50.4 t). north america in turn recorded a 5% increase to reach 1.74 moz (54.3 t). all three make up approximately a quarter of world palladium demand each in autocatalyst applications with Japan (0.83 moz, down 7.4%) and other regions (0.91 moz, up 1.6%) equally accounting for the remainder of the market.

ldg vehicle sales rose a moderate 0.2% to 69.3 m units last year, driven by healthy demand from all regions except Japan. china incentivised consumers with a sales tax cut, which boosted demand for smaller gasoline palladium-based vehicles. However, the rise in sales of gasoline globally was not that impressive and certainly not the only factor that continued to drive palladium demand growth in autocatalysts. Sustained substitution in the Hdv on-road and off-road sectors continued to weigh in palladium’s favour too, as did stricter vehicle emissions standards in various countries of the world.

newly adopted fuel economy and greenhouse gas emission standards in north america, europe and Japan in recent years directed more efficient technologies such as direct injection over port fuel injection engines. these, however, can emit much higher levels of particulate matter (pm). next year’s phase-in of euro 6c in europe, for example, will require all new gasoline direct injection vehicles to reduce the pm and particulate number (pn). this can be achieved by adjusting the fuel injection, but to be on the safe side the majority of oems will tackle this issue by installing an additional gasoline particulate filter (gpf). a gpf can be installed as a separate addition to a three-way catalyst or integrated as a four-way catalyst.

despite its similarities with a dpf, we estimate that the size of the filter will be considerably smaller in relation to the engine compared to a dpf, therefore requiring less precious metal. a stand alone gpf is usually loaded with 75%-25% platinum-palladium whereas an integrated four-way catalyst will have a higher palladium loading and some additional rhodium. additionally, placing the catalyst closer to the engine will raise the optimal operating temperatures more quickly and reduce the amount of cold start emissions. this in turn would reduce the amount of precious metals required as well.

treating the exhaust gas is one way to tackle emissions; fighting them at the source, the engine, another. turbocharging and egr are common methods of optimising the combustion process. manufacturers are also turning to new engine management systems, which reduce fuel consumption and consequently reduce emissions. for example, improved fuel injectors and cylinder design can reduce gasoline pn.

palladium demand from ldg vehicles therefore is likely to continue to rise across all regions in the future, driven by tighter emissions standards and an increase in vehicle sales. However, higher loadings per vehicle will not always be required due to a wider range of options that oems can use to comply with emissions legislation. a wider adoption of aftertreatment solutions in the Hdv market will be a supporting factor too, although substitution pressures from platinum are likely to slow.

rhodium overview

rhodium is widely used in three-way catalysts fitted to ldg engines of cars and motorcycles. it also is used in lean nox traps (lnt), usually installed on smaller diesel vehicles, also fitted to gasoline vehicles but to a lesser extent. demand for rhodium in autocatalyst applications fell last year by 1%, reaching 0.66 moz (20.7 t). demand from north america, europe and china was up whereas consumption from Japan and the other regions category both recorded declines. these declines more than offset the increase recorded elsewhere. both north america and china saw healthy gains driven by stricter emissions legislation through lev iii and robust vehicle sales, respectively. Japan suffered from a continued sluggish economic sentiment that restricted sales in the country.

autocatalySt demand: reSt of World

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highlights of emission standard timetables

light duty Vehicles legislation overview

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

europe

north america ePa

north america Carb

Japan

south Korea (diesel)

China (nationwide)

india

indonesia

thailand

heavy duty Vehicles on-road legislation overview

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

europe

north america

Japan

south Korea

brazil

russia

india (major cities)

india (nationwide)

China (major cities)

China (nationwide)

heavy duty Vehicles off-road legislation overview

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

europe

north america

Japan

south Korea

brazil

China (major cities)

China (nationwide)

euro 6b euro 6c / rde Phase 1 rde Phase 2 / 95 g/km Co2 Possible euro 7

tier 2 tier 3 introduction

euro 2 euro 4

leV iii Phase in leV iii tightening

Japan 09 Possible Japan 18

euro 6b euro 6c

China 4 China 5 China 6

bharat stage 4 bharat stage 6

greenhouse gas Phase 1 greenhouse gas Phase 2

Japan 09 Japan 16

euro 4 euro 5 euro 6

euro Vi Possible euro Vii

euro Vi euro Vii

euro V euro Vi

euro iV euro V euro Vi

tier 4b

Possible euro Vi

euro iii euro iV euro Vi

euro iV euro Vi

euro iV euro V

euro iV euro V

euro Vi

tier 4b stage V

tier 4b Carb/ePa

tier 3 tier 4a tier 4b

tier 4b Possible stage V



source: Various government departments; gfms, thomson reuters

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Jewellery

— Global platinum jewellery fabrication declined by 4% to an estimated 2.46 Moz (76.4 t) in 2015, dragged lower by a sizeable fall in demand from China. — China also played a central role in the precipitous slump in palladium jewellery demand which fell by 27% last year to 0.35 Moz (10.8 t).

In 2015, global platinum jewellery fabrication declined 4% to reach an estimated 2.46 Moz (76.4 t). This was the second successive annual fall and resulted in jewellery’s share of total platinum demand slipping to 32% last year, down from 45% at the start of the millennium. Softer platinum prices failed to stimulate demand in several key markets with economic factors central to the lack of growth. The decline in 2015 was mainly driven by a 7% fall from China and a modest drop in Europe. Demand in North America benefited from a stronger economy to expand by 2%, while Japan enjoyed a similar rise, with platinum gaining market share at the expense of white gold as sticker prices for the former were adjusted lower.

Palladium used in jewellery fabrication declined for the seventh consecutive year, by 27% to 0.35 Moz (14.7 t), the lowest level since 2002. The sizeable fall resulted largely from a precipitous fall in Chinese offtake, as the industry there remains on a knife edge with several closures last year. China’s share of the global total slipped to just 15% last year, compared to the peak of 76% in 2005. Europe now dominates global offtake at over 40% of the total, with this market declining only at the margin last year, while demand in North America retreated by 12% in 2015.

CHINA

Following a 5% decline in 2014, platinum jewellery fabrication declined a further 7% to an estimated 1.6 Moz (49 t) last year. In value terms, demand fell 30% to approximately US$1.6 billion, as the average price of platinum in local terms fell by 24%.

China’s annual GDP growth rate was 6.9% in 2015, the lowest in 25 years. While on first glance this growth rate would have made many other countries envious, the true impact on the ground failed to reflect this robust performance. One of the simpler, more accurate barometers to gauge China’s economic growth is to examine the country’s electricity usage, which rose just 0.5% for the year.

The Chinese economy has been slowing down since 2014. However, the surge in the domestic equities market did provide some optimism to investors, as by the end of May last year, the Shanghai Shenzhen CSI 300 Index had more than doubled since the end of 2013. Many speculators put their money into the equities market, hoping to take a quick ride on the rally. The domestic equities market then peaked in early June as the bubble finally imploded, losing 36.9% in the next three months. The meltdown caused massive wealth erosion for a large proportion of the Chinese population, hence putting a drag on consumption sentiment moving forward.

Meanwhile, a slowdown in the growth of the global economy, coupled with the deteriorating domestic spending sentiment, saw the total value of China’s exports and imports fall 7% in 2015. The country’s official manufacturing PMI, which tracks manufacturing activities of the larger sized enterprises in China, saw monthly ratings below 50 recorded in seven months during 2015; meanwhile the Caixin manufacturing PMI, which tracks orders of the more middle and smaller sized companies, displayed an even more worrisome picture, with monthly readings below 50 for 11 months last year. Both readings were implying the listlessness of the country’s manufacturing sector, which would have a negative impact on employment within this sector, and again affecting the domestic spending sentiment.

The Chinese have a long history of culture with affinity to gold. Platinum jewellery has a much shorter history within the Chinese community, but is relatively well received by the middle class, and the younger generations who are in their late 20s and 30s. However, there is no denial that to the majority of the Chinese population, gold is still the preferred metal for jewellery,

PLATINUM


North America 243 248 2%

Europe 207 205 -1%

Japan 318 324 2%

China 1,680 1,561 -7%

Other regions 100 118 18%

Total 2,548 2,456 -4%


North America 65 57 -12%

Europe 150 148 -1%

Japan 52 47 -10%

China 172 52 -70%


Total 478 347 -27%


JEWEllERy DEMAND

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simply because of its high transparency in terms of price mechanism as well as being easier to liquidate should the need arise.

Platinum jewellery failed to take advantage of the sizeable fall in demand for gold jewellery last year, as for the reasons mentioned above. The only jewellery sector that saw substantial growth in 2015 was 18-carat gold jewellery, registering double-digit growth. Due to the nature of the metals, fabricators are able to work on more sophisticated designs with 18-carat gold than platinum pieces, and given the general bullish nature of this industry segment retailers were pushing 18-carat gold more aggressively than platinum.

In 2013, when the gold price dropped below $1,500 in a short timespan, there was a gold rush in China that saw consumers rushing to buy all the gold pieces they could afford as they thought that gold at that level was a bargain. Unfortunately, the lacklustre performance of the platinum price last year did not translate to increased demand from the Chinese bargain hunters this time around. A lack of corresponding adjustments to sticker prices, which failed accurately to reflect the price differential between the international platinum price and that of gold, caused many consumers to think twice before purchasing given the widening gap at the retail level. Indeed, many traders across the supply chain were unwilling to reduce price points in an effort to realise a higher margin. While more notable discounts were offered by retailers during the second half of the year, it was a little bit too late to pick up the void already created during the first half of the year. Demand for gem set platinum designs were the hardest hit as margins for these items are significant but even plain platinum offtake, often aimed at the bridal segment, succumbed to the economic pressures last year, falling short of the previous year’s volumes.

Another interesting observation last year was the shift by China’s jewellery fabricators to produce platinum pieces with a lower purity content. China’s platinum jewellery market is basically made up of purities in Pt999, Pt990 and Pt950, with the former two previously commanding the lion’s share of the market. However, fabricators have been focusing more on producing Pt950 purity lately, especially since the second half of last year, seeing this segment gaining market share quickly against other purity forms. By the end of the first quarter this year, the Pt950 purity designs had become the dominant form within the segment, commanding over 60% market share. The popularity of the Pt950 purity product is two-fold: Firstly, working with a higher purity content requires a more sophisticated tooling process and increased costs of fabrication, thus lowering the purity pieces helps producers to contain and even reduce costs; secondly these production costs savings are now being passed on to the consumers, hoping that this may increase retail activity.

As uncertainty persists over the Chinese economy outlook, we expect people to remain cautious on their spending and thus demand for platinum from the Chinese jewellery sector may continue to fall in 2016.

Palladium jewellery fabrication in China dropped 70% last year, to an estimated 0.05 Moz (1.6t), the seventh consecutive annual decline. Not surprisingly, given the scale of last year’s fall and the persistent declining profile, the outlook for this industry remains bleak.

Unlike platinum, palladium jewellery suffers from impediments such as an absence of a transparent pricing mechanism (palladium is not traded on the Shanghai Gold Exchange) and relatively low recognition of the metal among the general public. A lack of marketing promotion or an adequate platform for consumers is also a big obstacle for this sector to expand in the country.

Perception has not been working any favours for palladium, either. Back in 2008 and 2009, when precious metals fell sharply amid the global financial crisis, bargain hunters targeted platinum investment when its price was lower than gold. Unfortunately, some took advantage of the situation and sold palladium while marketing it as platinum, to gain the price differential. This fraud made the consumer market even more cautious and created a suspicious attitude toward palladium, as it can be difficult for the general public to differentiate between platinum and palladium.

CHINESE jEWEllEry FABrICATIoN

0

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20142012201020082006

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Tonnes


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Palladium jewellery supply has also been weighed down by the solid popularity of the non-pure gold jewellery pieces, mostly for 18-carat gold jewellery. This has indeed enticed manufacturers to shift their fabrication capacity to the latter. In 2014, there were essentially only three major palladium jewellery fabricators left in the country, and two of them exited the palladium industry during 2015 and shifted their producing capacity to 18-carat gold jewellery, leaving only one major player within the Chinese industry.

While the platinum jewellery sector still uses palladium alloys to enhance the softness of some of their jewellery items, especially for the more sophisticated designs, the consumption of the metal for this purpose is minimal. Similarly, it is not common in China to use palladium for white gold production.

While it is unlikely we will see the sole surviving Chinese fabricator exit the industry any time soon, their average monthly palladium fabrication volumes are expected

to remain under pressure this year given the forecast for an environment of rising palladium prices and slower economic expansion which is likely to further erode consumer spending. Unless the consumption of palladium jewellery picks up acutely, we do not foresee other fabricators focusing on this sector in the current climate. Factoring in some partial fabrication from the two players who have already exited the palladium industry last year, and without any significant newcomers, China’s palladium demand from the jewellery sector will likely fall further this year and without a radical overall is expected to continue in this vein.

Japan

japanese platinum jewellery fabrication returned to growth in 2015, recording a 2% rise to an estimated 0.32 Moz (10 t) on a gross basis. The modest rise followed a 3% drop in 2014 and marks the fourth annual increase over the last five years. An annual rise looked unlikely for most of last year as the country battled to maintain economic growth. Indeed, the japanese economy again slipped back into recession in the second and third quarters, which in turn precipitated weak consumer sentiment and a drop in retail spending. A final quarter resurgence in demand, aided by a significant drop in the platinum price and coupled with the first green shorts of economic recovery, helped offset earlier losses.

Such a modest increase in platinum jewellery fabrication demand in a year when platinum prices in local terms retreated 13% may surprise, but it was the economic pressures, and the general lack of consumer confidence, that weighed heavily on the retail market for much of the year. Field research last year found that the platinum market was again the most resilient of the precious metals markets in 2015, outperforming gold jewellery fabrication which retreated by 3% year-on-year, with consumers migrating from white gold to platinum. Indeed, platinum jewellery demand rebounded faster than most retail segments once the economy began to show the first glimmers of a rebound in the latter stages of the year as this was combined with platinum in yen terms trading at a level not seen since August 2012.

The weaker yen has also generated a prolific increase in tourists to japan, most notably from neighbouring countries. According to japan’s National Tourism organisation, international tourist arrivals surged 47% to just short of 20 million in 2015, boosted largely by a 54% increase from visitors from Asia. The charge was led by China, which more than doubled its tourist visitors in

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2015. This impressive rise provided much needed support to the ailing retail sector, most notably at the high-end of the market, and primarily in the central shopping districts of Tokyo such as Ginza. This rise in tourist spending flowed through to improved department store jewellery sales and especially branded platinum jewellery in the high street stand-alone stores.

Another positive for platinum jewellery last year was the expansion of the non-bridal segment. While bridal platinum jewellery dominates total offtake at close to a fifth of all jewellery sold in Japan and enjoys over 90% market share in wedding rings, the gifting market, which maintains a far lower market share, has been enjoying a healthy expansion. This has been on the back of significant promotion across the supply chain as the industry looks to find new avenues to generate fresh demand in a mature market with dwindling marriages. The lower platinum price in 2015 saw sticker prices adjusted lower in most cases, encouraging consumers to purchase larger items such as pendants or necklaces and look to higher purity designs.

locally, it was the department stores and contemporary chain stores that saw the strongest gains in 2015, likely benefiting from the increase in inbound tourists. Mail order sales (including internet and television promotion) were another area of expansion while independent retailers and traditional chain stores were the hardest hit as they did not benefit from the tourist trade to the same degree.

Turning to Japanese palladium jewellery, we estimate that offtake declined 9% in 2015 to 0.05 Moz (1.4 t), the second consecutive annual fall. Palladium is principally used in jewellery fabrication as an alloying ingredient, used in both white gold and platinum. last year, demand for platinum jewellery was relatively stable, but, a drop

in demand and overall market share loss for white gold drove demand lower.

NortH AmerICA

Platinum jewellery fabrication rose to 0.25 Moz (7.7 t) in 2015, a 2% increase over the previous year. This growth was slower than the 5% increase in 2013 and the 3.5% increase in 2014. The slowdown in growth was mostly due to the stronger dollar, which boosted demand for foreign-made jewellery due to its improved affordability. United States retail sales of platinum jewellery, by contrast, increased at a stronger pace in 2015 relative to the prior year. According to the Platinum Guild International’s “Retail Barometer” report, retail sales in ounce terms increased 10% in 2015 compared to 8% in 2014. Sales in unit terms increased 12% against 5% in 2014. The stronger increase in unit terms compared to ounce terms reflects the fact that smaller weighted pieces were sold in 2015 compared to the previous year. This trend is supported by the differing growth rates of platinum jewellery imports of chain, rings, and earrings. last year, chain imports dropped 25% while ring imports increased by 45%. Earrings imports fell a modest 5%. Overall, United States platinum jewellery imports totalled 0.05 Moz (1.6 t), up 13% from 2014. Imports accounted for 19% of wholesale purchases last year, up from 18% the previous year and up from 10% in 2011.

The bulk of platinum demand in the United States comes from the wedding segment, particularly for wedding bands and engagement rings. The bulk of rings are made of white gold, with platinum coming second in popularity. In recent years, however, yellow gold rings have gained share of this market, as the lower gold price has made gold more affordable. Fashion trends also have favoured yellow jewellery in the wedding segment. This market share loss has not materially adversely impacted platinum demand, however. More so, yellow gold has taken market share from white gold. That said, it is possible that should this trend continue, it could weigh on platinum demand in the future.

Palladium jewellery fabrication fell to 0.06 Moz (1.8 t) in 2015, down 12% from the previous year. last year marked the sixth consecutive annual drop in jewellery demand for palladium in North America, driven by a lack of marketing and consumer interest.

europe

European platinum jewellery fabrication continued its downtrend in 2015, due to subdued interest among 0

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consumers on the back of a lack of advertising in the region in comparison to gold jewellery. Moreover, despite lower prices platinum is still considered an expensive material and mostly used for high-end branded jewellery, watches and wedding bands. Another key factor that contributed to lower jewellery offtake last year was the ongoing weakness in China, which had a knock on effect on fabrication volumes in key manufacturing centres. That said, last year’s decline was only marginal, at 1% year-on-year, as platinum’s discount to gold of over $100/oz on average saw some consumers switch back from white gold to platinum. Palladium jewellery fabrication was down year-on-year in 2015. This was partly a reflection of the weakness in the dominant sector of palladium jewellery, namely wedding bands, in key countries and the ongoing poor marketing campaign for palladium-containing jewellery. That said, perhaps the most important factor driving offtake lower last year was the 38% drop in platinum’s premium over palladium, which led to a slower rate of substitution of platinum towards palladium in gold-containing pieces and, in some instances, a shift back to platinum.

The dominant use of platinum and palladium in Switzerland continues to come from the watch industry. The watch industry in Switzerland ended 2015 struggling desperately against the combined headwinds of a continued crackdown on corruption in China and more importantly, the stronger Swiss franc, especially against Asian currencies. As a result, platinum usage was down 6% in 2015. However, this masks a year of fluctuating fortunes for platinum watch demand.

The first half of 2015 saw demand up by almost a fifth. The second half of the year saw demand fall off a cliff dragging the overall figure into negative territory. While reports are that underlying demand has clearly softened from Asia in general and China in particular, and this is only partially offset by an improvement in demand

from the United States, it is also clear that there was a marked stocking cycle by a number of major watch manufacturers last year. Indeed figures from early 2016 show this segment continues to struggle, although we expect this situation to improve as the manufacturers halt destocking in the coming months.

Germany’s platinum jewellery registered a 5% drop in 2015, due to weak domestic consumption and a considerable decline in demand for platinum watches from China in light of continued anti-corruption measures. That said, demand for wedding bands benefited from platinum’s discount to gold. Palladium jewellery was up year-on-year, thanks to continued growth in carat palladium jewellery and stable demand for white gold.

last year, platinum jewellery fabrication in the United Kingdom was a rare bright spot in the usage of platinum group metals by the European jewellery sector. Indeed, hallmarking of the dominant 950 platinum category was up 10% year-on-year for 2015 as a whole. This was an interesting development given the widespread talk about a movement towards yellow gold. Crucially underpinning this performance was the weakness in platinum prices, even if the impact on consumer prices did not fully reflect this. The performance of palladium was much softer, despite the fact that it was much cheaper year-on-year, as indicated by hallmarking falling by 7%. This partly reflected the aforementioned shift towards yellow gold, in this case from white gold. Research contacts also indicated that the weakness was felt in the dominant sector of palladium jewellery in the country, namely for male wedding rings, as it lost market share.

Platinum jewellery fabrication in Italy continued to decline in 2015, as local consumption remained feeble due to affordability issues. In addition, weaker export demand for top-end platinum jewellery, particularly from

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China and Russia, also contributed to lower offtake last year. Meanwhile, palladium jewellery suffered from lower demand for white gold pieces recorded in 2015.

INDIA

Indian platinum jewellery fabrication declined last year by 10%, attributed to lower stocking following the steep decline in prices and excess inventory at stores. The annual average price in rupee terms last year declined by 20% from 2014 as compared to a 3% year-on-year decline in 2014. Given the price risk and a tight credit environment, many considered it prudent to be low on inventory. End consumption, however, clocked growth of an average 8%, with volumes driven largely by expansion of the male jewellery segment. From the conventional method of alloying with palladium, alloying with ruthenium was a new trend that emerged last year.

DeNtAl

— Demand for palladium in dental applications declined 6% last year to an estimated 0.45 Moz (13.9t), with falls recorded in all key markets.

Dental demand in Japan is estimated to have fallen last year by around 4% to reach 0.24 Moz (7.5 t), the seventh consecutive decline. Domestic demand is largely determined by the level of demand for Kinpala 12 (‘kin’ is the Japanese for ‘gold’, and ‘pala’ is ‘palladium’ abbreviated), the alloy that is used in almost 90% of dental treatments. To receive a rebate the government stipulates that the alloy must contain a palladium content of 20%. Despite the weak economic environment that saw Japan slip back into recession last year and saw consumers likely delay non essential dental work, demand for palladium in this sector was relatively well supported as the government rebate dentists received was often more than the prevailing cost of the metal, which encouraged stock building across the profession.

North American palladium dental fabrication fell to 0.14 Moz (4.26 t), down 5.5% from the previous year. Palladium usage continued to be substituted for other materials. Palladium is mainly used in porcelain-fused-metal (PFM) crowns, which have been the predominant restoration of choice since the 1970s. Around 2005 and 2007, new monolithic restorations were introduced (monolithic restorations are single-layer rather than dual-layered like PFMs), mainly solid zirconia and lithium disilicate. In 2006, metal-based units such as PFMs accounted for 80% of the crown market. At present, its share is around 40%, according to lMT Research. Metal-based crowns are expected to continue to lose favour in the dental market, which will further reduce palladium usage.

Dental fabrication in Europe fell by 6% last year to an estimated 0.06 Moz (1.8 t). This marked the fifth consecutive decline and reflects the continued migration away from base metal amalgams (in particular cobalt:chrome), to more cosmetically pleasing applications such as ceramics and porcelain-fused-metal.

eleCtroNICs

— Platinum demand fell by 7% last year to 0.15 Moz (4.7 t) due to the continual rise of SSD technologies. — Palladium uptake from the electronics industry declined by 11% last year to 1.21 Moz (35.2 t) due to the decline in global demand for electronics.

The largest source of demand for platinum in the electronics sector comes from the hard disk drive (HDD) industry, where the metal is used as part of magnetic storage media to provide thermal stability and enhance

PALLADIUM



Europe 63 59 -6%

Japan 253 242 -4%

China 2 2 -0%

Other regions 10 9 -10%

Total 475 447 -6%


DENTAl DEMAND

PLATINUM



Europe 1 1 0%

Japan 17 15 -12%

China 30 28 -7%


Total 163 151 -7%

PALLADIUM



Europe 204 169 -17%

Japan 339 302 -11%

China 272 242 -11%


Total 1,358 1,209 -11%


ElECTRONICS DEMAND

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data storage capabilities. Due to consumers’ preferences towards mobile devices and away from traditional PCs, along with the continual growth of other technologies such as solid-state drives (SSDs), global HDDs shipment fell by an estimated 16.8% in 2015. We estimate platinum use in HDDs amounted to 0.14 Moz (4.4 t) last year, a 7% decline from the previous year and the lowest level in our 16-year data series.

The largest market segment for HDDs is personal computers, and HDD shipments to the PC market fell by an estimated 23% last year. Meanwhile, enterprise HDDs, specifically those used in servers and data centres, fell by an estimated 3%. Despite declines in HDDs shipments, total capacity shipped actually increased, which has offset some of the fall in platinum used in HDDs. However, thrifting continued to affect platinum’s electronics demand, as in the last decade, average platinum loadings per disk have declined by 53%, a period in which HDD shipments increased by 25%.

The use of platinum in storage technologies has been structurally declining since 2007. Other than thrifting, another driver behind the decline in platinum offtake in the storage sector can be attributed to the substitution by other technologies such as SSDs, which are based on semiconductor storage media instead of magnetic media, and thus contain no platinum. SSDs are mainly used in tablets and smartphones, and consumer preferences towards mobile devices continued to dictate storage preferences, seeing global shipments of SSDs continued to grow at double digit figure in 2015. Moreover, SSDs also gained a larger position in notebook and portable PCs, displacing millions of HDDs last year.

The emergence of SSDs in recent years is due to their higher and faster data transfer rates, better reliability

and reduced power usage compared to HDDs. However, HDDs will remain the most dominant storage technologies at least for the next couple of years, as the cost per terabyte for SSDs is relatively higher. However, the continual expansion in SSDs production, which could enhance economies of scale, coupled with capacity improvements, may further narrow the costs gap between the two down the road.

Hindered by slowing economic growth worldwide, along with other factors already mentioned above, global notebook and PC shipments continued to fall in the first quarter of 2016. While it is likely that SSDs will continue to take market share away from HDDs, on a positive note the emergence of new HDD technologies should at least offset part of the demand lost. The shipments of helium hard disks, which in general have higher platinum loadings per drive unit, should continue to increase in 2016. Demand for storage capacity from applications like cloud storage and data centres are likely continue to grow at a double digit pace in the next few years, where demand for HDDs will also benefit from this area.

Demand for palladium in the electronics sector declined by 11% last year to a total of 1.21 Moz (35.2 t), its lowest level in the last decade. The main source of demand in the electronics sector comes from multi-layered ceramic capacitors (MlCCs), where palladium or silver-rich palladium alloys form a conductive electrode material sandwiched between ceramic wafers. These components are used in a wide range of electrical products, including computers, digital televisions, automotive vehicles and, increasingly, tablets and smartphones.

The softness in palladium uptake from the electronics sector last year was attributed to the weakening global economy, which resulted in a retreat in global shipments

GlOBAl HARD DISK DRIvE SHIPMENTS

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of electronics. Global shipments of PCs, tablets and digital televisions, all recorded year-on-year decline. The increase in global vehicle production as well as handsets, however, were not enough to offset this loss.

Another area contributing to the decline in palladium uptake was the growing flow of metal reclaimed in the process of electrical and electronic waste recycling. With hundreds of millions of electronic products produced and scrapped each year, e-waste has become an important secondary source for various metals. Unlike jewellery scrap, electronic scrap is broadly price-insensitive and its supply is a function of recycling infrastructure and metal content in old devices.

On the other hand, palladium benefited from growing use in the form of electroplating compounds as a substitute for expensive gold. The expansion in use of palladium coated copper bonding wire have been gaining market share in the last few years against gold bonding wire, given the lower costs. Based on our estimate, the market share of palladium coated copper bonding wire increased from 30% in 2014 to 33% last year.

GlAss

— Glass demand for platinum rose to 0.16 Moz (5.1 t) in 2015, up from -0.05 Moz (1.6 t) the previous year. Rhodium demand, meanwhile, fell from 0.51 Moz in 2014 to 0.49 Moz last year. This differing growth trend between the two metals was mainly driven by a lower rhodium price in recent years, which accelerated adjustments in fibreglass bushings that

favour higher rhodium usage.

Platinum is used in the production of display glass and glass fibre, mostly due to its high temperature tolerance and its inert nature. Rhodium is used as a strengthening agent. Platinum and rhodium alloys are used in melting tanks to make display glass and equipment called “bushings” fitted to fibreglass furnaces.

Platinum demand rose to 0.16 Moz (5.1 t) last year, compared to supplying the market with 0.05 Moz (1.6 t) the previous year. In 2014, the outflow of metal from the industry was driven by lCD display glass facility closures in Japan, where 0.12 Moz (3.6 t) of metal was brought back to market. last year, facilities continued to be decommissioned in Japan, resulting in 0.04 Moz (1.2 t) released back to the market. New glass production facilities commissioned in China and other countries more than offset Japan as a net supplier in 2015, though.

The low rhodium price compared to platinum has helped reduce manufacturer costs related to bushings in recent years. Platinum-rhodium alloys in bushings can range, for the most part, between 80% and 90% platinum. In recent years, the ratio has moved closer to 80:20 for platinum and rhodium respectively, because of rhodium’s discount to platinum prices. Currently, the bulk of bushings have this ratio, with some exceptions. In 2015, the increase in platinum demand and the decrease in rhodium demand reflected the impact of this trend. There was very little change in the alloy composition last year whereas in previous years when the alloy was changed out for a higher-rhodium alloy, platinum was sold back into the market and rhodium was bought.

As of the end of 2015, glass production facilities housed just over 5.5 Moz (172.2 t) of platinum, equating to 73% of annual total demand. About once a year, PGM equipment needs to be recycled, incurring roughly 1% to 2% losses

GlASS DEMAND

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PLATINUM



Europe 8 9 7%

Japan -115 -39 n/a

China 13 68 406%


Total -50 163 n/a

RHODIUM



Europe 10 5 -53%

Japan -4 1 -128%

China 21 15 -29%

ROW 17 24 43%

Total 51 48 -6%


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CHemICAl

— Platinum demand from the chemical sector declined 17% last year to 0.49 Moz (15.4 t), its lowest level since 2012, driven by a significant contraction in paraxylene (PX) capacity. — Palladium use in the chemical sector slightly recovered in 2015. — Demand for rhodium rose to a record high, driven by continued growth in oxo alcohols.

Demand for platinum, palladium and rhodium from the chemical sector (in which we include demand from the petrochemical industry), arises from their use as catalysts. In the case of platinum, this is historically for the production of paraxylene (PX), nitric acid and Active Pharmaceutical Ingredients (APIs), while it is also used in the curing of silicones. More recent technologies have also recorded the use of platinum catalysts for use in production of on-purpose propylene and isobutylene derivates via propane (and to a lesser extent butane) dehydrogenisation reactions (PDH & BDH). We estimate that platinum use in the chemical sector fell by 17% year-on-year in 2015, falling from a record high in the previous year, to bring platinum use in the sector to a total of 0.49 Moz (15.4 t). Although a decline developed globally, the greatest fall in demand came from ‘Other regions’, recording a decline of over 30% year-on-year.

In terms of areas of usage, platinum demand as a catalyst in PX production was the largest driver in the fall for platinum demand in 2015, contracting by more than half the level recorded in 2014. Weakened global demand for PTA (of which PX is the largest feedstock), overcapacity on the back of years of aggressive plant building, in addition to lowered product prices as a consequence of falling crude oil prices, resulted in widespread project delays, consolidations and rationalisation across the industry. With platinum demand a direct function of capacity growth, the fall in capacity developments in China, (PX largest market), helped contribute to the decline, while outright capacity contractions in North America, Europe and Japan, further reduced demand.

Meanwhile, platinum’s catalytic use in the production of nitric acid, weakened in 2015, driven by low crop prices, weakened economic activity in emerging economies and overcapacity. However, this was partially offset by strong demand in silicone production, new PDH plant builds, in addition to steady growth from APIs.

Palladium’s usage in the chemical sector primarily derives from demand for catalysts in the production of vinyl acetate monomer (vAM), purified terephthalic acid (PTA), hydrogen peroxide, catchment gauzes in nitric acid synthesis and for use in the removal of acetylene during ethylene production. In addition to being a catalyst for the production of methyl ethylene glycol (MEG) from coal, palladium salts are used for electroplating purposes. We estimate that palladium use in the chemical sector rebounded by 2% in 2015, to 0.4 Moz (12.5 t), the second

CHEMICAl DEMAND

PLATINUM



Europe 100 88 -12%

Japan 45 37 -18%

China 156 152 -3%


Total 595 494 -17%

PALLADIUM



Europe 159 167 5%

Japan 21 20 -5%

China 77 59 -23%

Other Regions 83 96 16%

Total 395 401 2%

RHODIUM



Europe 18 19 4%

Japan 7 7 -1%

China 39 42 7%


Total 88 90 3%


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highest level in our records. The key drivers behind the recovery in demand for palladium stem from accelerated growth in MEG from coal applications, while steady growth was recorded for vAM and palladium salts. This, however, was offset by weakness in nitric acid demand (for reasons above), while palladium demand for PTA recorded negative growth, in light of weakened demand, chronic oversupply and heightened competition from alternative cheaper and abundant products such as cotton.

Demand for rhodium in the chemical sector is driven by its use as a catalyst in the production of oxo alcohols, acetic acid, nitric acid, while also being used as a catalyst in pre-reformers and hydrogenation reactions. In 2015, rhodium demand rose by 2%, recording its sixth consecutive year of growth to total 90 Moz (2.7 t). The key driver of growth this year came from oxo alcohols, which is responsible for over half of total chemical rhodium demand. In this application, rhodium is utilized in a hydroformylation reaction step, with oxo alcohol products used in end industries such as refrigeration, air conditioning, chemical processing and consumer goods. In 2015, oxo alcohol demand rose by 2% to its highest level in our records, with growth in China leading the way, while, a steady uptick in growth for pre-reformer catalysts further aided demand. However, a 7% fall in acetic acid production year-on-year, in which rhodium is used in a methanol carbonylation step, in addition to a decline in nitric acid (for reasons mentioned above) offset demand.

petroleum

— Global demand for platinum in the petroleum sector fell 18% in 2015, to its lowest level on record, while palladium demand contracted by 7%.

Demand for platinum and palladium from the petroleum sector arises from their use as catalysts. In the case of platinum, developments in oil refining capacity, specifically new catalytic reforming and isomerisation capacity, remain the largest elements of platinum demand, while it is also utilised in alternative fuel producing technologies, such as GTl plants. Palladium usage in the petroleum sector primarily arises from its use as a bifuncational catalyst, in a two-stage hydrocracking (HC) unit, associated with a large proportion of downstream crude refiners globally.

We estimate that platinum’s use in petroleum sector in 2015 fell by 18% year-on-year, to 0.1 Moz (3.1 t), the lowest recorded level in our history, while palladium demand fell by 7% to 0.01 Moz (0.4 t). The key region responsible for the contraction in platinum and palladium

demand last year was Japan, in which demand turned negative for both metals. Since 2006, we have recorded Japanese domestic oil demand to be in decline, with the country suffering from an ageing, shrinking population, smaller-engine cars, and an economy which is shifting from oil to gas. However, last year, with legislation from the Ministry of Economy, Trade and Industry tightening in conjunction with Brent crude oil having fallen to its lowest annual average level since 2004, the industry faced widespread rationalization, with two of the five largest refiners entering into a merger.

Meanwhile, the tumble in crude oil prices in 2015, particularly for countries who are heavily dependent on income from oil exports, such as Russia and Saudi Arabia, resulted in a wave of refining project delays, consolidation as well as rationalisation due to a reduction in oil revenues reducing government expenditure. Furthermore, a slowdown in new project builds in China saw demand fall for both metals. However, this was partially offset by growth in Europe (excluding Russia), in which refiners aimed to optimize their plants rather than face closures, in light of boosted margins, while North America, continued to see moderate growth.

PLATINUM



Europe 23 55 12%

Japan 7 -21 n/a

China 7 6 -14%


Total 122 100 -18%

PALLADIUM


Total 15 14 -7%


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FUEllING THE FUTURE

Fuel cells are devices that electrochemically combine

hydrogen and oxygen to produce electricity, water, and heat. A

fuel cell electric vehicle (FCEv) is a vehicle that uses a fuel cell

to power its onboard electronic motor. Fuel cells do not burn

fuel, making the process quiet and pollution-free.

Fuel cells generated headlines last year when three

automakers, Toyota, Honda and Hyundai, commercially

launched their models for the first time. The strongest

advocate of the technology has always been Toyota which

expressed ambitious plans to make it one of its prime

powertrain options in reducing the deployment of all its

gasoline-only engines by 2050. It will load its future line-up

with gasoline-electric hybrids, battery electric and fuel cell

electric cars. As such, it targets to cut 90% of CO2 emissions

generated by its vehicles by 2050, compared to 2010.

This plan, however, will need support from a lot of different

angles. Aside from the infrastructure that needs to be built

and the continued reliance on government subsidies, which at

present is only available in Japan and South Korea, its network

of suppliers, dealers and customers will have to embrace this

strategy as well.

Despite all the hype about the long awaited public

introduction of the fuel cell powered electric vehicles, however,

battery vehicles are getting all the attention. To the fuel cell

experts that is not surprising considering the low energy

conversion efficiency of hydrogen fuel cells. large amounts

of energy are required to isolate hydrogen from natural

compounds (water, natural gas, biomass), package the light

gas by compression or liquefaction, transfer the energy carrier

to the user and convert hydrogen to useful electricity with fuel

cells. This process leaves around 25% for practical use; a stark

contrast with the less complex and far more efficient 70%

energy conversion from battery electric cars.

FCEv production has been concentrated in Asia, notably

Japan, with Toyota leading the way (66% market share)

followed by Hyundai (33%) and Honda (1%) and reached

approximately 5,000 vehicles last year. GM and Ford Group

and Daimler are expected to launch FCEv themselves from

2017 onwards. The recent vW scandal and the introduction of

real world driving emissions testing in Europe in 2017, mean

that it is likely that various OEM’s will add hybrid, electric and

FCEv models to their offering in order to make their vehicle

fleet average compliant with the 95g/km CO2 target by 2021.

Toyota plans to sell 30,000 FCEv by 2020, although this is

dependent on the development of a lot of different factors.

Taking a more conservative approach based on forecast vehicle

production from lMC Automotive, fuel cell driven vehicle

production from all OEMs is likely to reach approximately

22,000 units by 2020. That represents a CAGR of 32%, which

is considerable. However, compared to the total global vehicle

sales of around 100 million units it is still very small.

Platinum demand used in FCEv installed on passenger cars

amounted to around 80kg last year, or roughly

2,500 ounces. We expect demand for platinum in fuel cells

from the automotive industry in 2020 to be at least five times

what it is today, again a considerable increase and taking

firmly the driving seat in overall platinum demand from this

niche technology. However, putting it in perspective, the

impact on the overall market remains small, representing

merely 0.1% of total global platinum demand.

What lies beyond that remains susceptible to a lot of different

variables. Challenges and hurdles to overcome with regard to

infrastructure, government subsidies, supply chain adoption

and consumer preference for example are just a few. Assuming

the technology matures, OEMs will actively continue to look

for ways to thrift platinum. Eventually FCEv should not contain

more platinum than is found on the catalytic converters fitted

to the exhausts of diesel cars today.

Therefore, in order for FCEv to become a strong and

established demand area for platinum, rapid expansion of the

FCEv global vehicle fleet will have to emerge, which translates

into continued substantial capital outlays from OEM’s into this

technology. However, given the momentum in popularity of

battery electric vehicles, the energy efficiency gap with FCEv

and the energy intensive process of generating hydrogen, we

are not convinced that commitment is present. Instead OEM’s

could easily choose to redesign their models to fit batteries

and abandon their fuel cell ambitions altogether. In that case

platinum demand from this sector will likely remain what it has

been over the last three decade’s: a niche market.

ElECTRIC vEHIClE PRODUCTION

0

50

100

150

200

250

201520142013201220112010

Thou

sand

Veh

icle

s

FCEV

0

200

400

600

800

1000

Battery Vehicle Production

Source: GFMS, Thomson Reuters; LMC Automotive

Battery Vehicle Production (LHS)

FCEV Vehicle Production

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gfms Platinum gROuP mEtals suRvEy 2016

(000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mine production

South Africa 5,447 5,075 4,676 4,603 4,750 4,740 4,182 4,368 3,220 4,522

Russia 948 917 830 793 785 818 803 741 687 721

Canada 228 204 227 170 127 270 220 217 278 242

United States 138 120 115 123 111 119 118 120 119 122

Zimbabwe 167 169 180 229 286 341 335 409 398 398

Others 95 98 129 129 124 116 137 156 154 152

Total mine production 7,024 6,584 6,156 6,048 6,183 6,404 5,796 6,011 4,856 6,158

Autocatalyst scrap

North America 510 527 556 392 449 475 413 462 424 350

Europe 199 247 295 258 299 347 312 374 432 325

Japan 56 63 68 55 61 54 56 57 63 65

China 4 6 7 10 13 17 23 30 36 43

Other regions 64 66 80 69 80 102 120 122 133 148

Total autocatalyst scrap 832 909 1,006 785 902 994 924 1,045 1,087 931

Old jewellery scrap

North America 9 22 41 33 12 10 9 10 9 6

Europe 7 9 11 12 10 8 8 7 7 7

Japan 257 418 579 273 281 344 257 235 245 216

China 90 110 333 177 216 240 234 235 252 304

Other regions 1 1 2 1 2 3 3 3 3 3

Total old jewellery scrap 365 560 966 496 522 606 512 491 516 536

SUPPLY 8,221 8,053 8,128 7,329 7,607 8,003 7,231 7,547 6,459 7,625

Autocatalyst demand

North America 758 783 562 346 381 474 451 467 499 461

Europe 1,917 2,074 1,804 1,280 1,411 1,447 1,254 1,184 1,266 1,346

Japan 549 510 517 309 366 304 316 295 278 271

China 220 204 183 180 212 182 177 218 241 240

Other regions 454 476 448 387 547 583 658 679 673 693

Total autocatalyst demand 3,896 4,047 3,514 2,502 2,918 2,990 2,856 2,843 2,957 3,011

Jewellery demand

North America 244 217 205 181 212 218 224 235 243 248

Europe 240 251 239 222 219 214 212 211 207 205

Japan 669 482 249 270 262 283 320 327 318 324

China 1,018 1,069 1,110 1,953 1,439 1,588 1,736 1,776 1,680 1,561

Other regions 38 41 45 52 69 85 93 97 100 118

Total jewellery demand 2,210 2,061 1,847 2,678 2,201 2,388 2,585 2,646 2,548 2,456

Chemical demand

North America 87 94 94 59 95 78 65 74 78 68

Europe 59 74 74 54 81 91 79 79 100 88

Japan 27 29 36 28 50 31 22 24 45 37

China 27 35 44 39 80 95 102 120 156 152

Other regions 120 138 92 101 176 191 131 135 216 149

Total chemical demand 320 370 340 281 482 486 399 432 595 494

AppENdix 1 - plAtiNUm SUpply ANd dEmANd 2006-2015

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(000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Electronics demand

North America 84 74 46 34 29 21 11 7 2 2

Europe 34 28 17 10 6 1 1 1 1 1

Japan 68 55 39 32 30 25 21 17 17 15

China 27 31 32 33 37 36 34 31 30 28

Other regions 190 209 159 145 150 141 128 113 113 105

Total electronics demand 404 397 292 254 252 225 195 169 162 151

Glass demand

North America (33) (5) 3 7 (7) 12 13 5 6 8

Europe 49 (11) (6) (16) 15 9 33 21 8 9

Japan 168 40 114 31 142 108 84 (87) (115) (39)

China 48 112 177 (71) 157 56 165 125 13 68

Other regions 217 295 219 141 198 154 28 20 38 118

Total glass demand 449 431 507 91 505 338 323 84 (50) 163

Petroleum demand

North America 64 58 27 56 30 28 41 52 33 37

Europe 52 44 38 40 35 16 15 4 23 55

Japan 18 12 26 9 21 8 8 (12) 7 (21)

China 3 5 22 4 7 7 11 15 7 6

Other regions 30 32 77 54 75 84 51 47 52 23

Total petroleum demand 167 151 190 163 168 143 126 106 122 100

Retail investment

North America 34 39 105 131 40 53 87 55 50 55

Europe 2 15 30 38 10 17 13 10 8 7

Japan (60) (32) 317 142 37 206 148 42 45 390

Other regions 3 1 0 3 8 36 34 34 28 23

Total retail investment (22) 23 452 313 95 312 282 141 131 474

Other industrial demand

North America 210 203 182 162 175 200 237 248 272 279

Europe 157 163 163 152 165 183 202 208 222 224

Japan 51 53 53 44 56 60 71 73 79 76

China 14 16 18 30 43 50 52 60 68 80

Other regions 31 37 40 42 56 65 59 59 59 62

Total other industrial demand 463 472 456 431 494 559 621 649 700 721

DEMAND 7,887 7,951 7,599 6,714 7,114 7,442 7,388 7,070 7,167 7,570


Identifiable stock movements

industry Stocks 0 (200) (300) 665 0 (100) (300) (1,000) 1,300 (50)

EtF release/(build) 0 (194) (102) (384) (574) (145) (239) (892) (218) 260

Sub Total - Stock Movements 0 (394) (402) 281 (574) (245) (539) (1,892) 1,082 210

Net Balance 334 (293) 126 896 (82) 317 (696) (1,415) 375 265


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South Africa 2,857 2,677 2,365 2,481 2,646 2,686 2,391 2,432 2,008 2,653

Russia 3,164 3,049 2,701 2,677 2,722 2,704 2,624 2,527 2,582 2,575

Canada 558 570 524 281 352 560 557 530 578 519

United States 466 425 384 407 374 399 396 404 401 406

Zimbabwe 135 132 139 177 222 261 256 314 325 323

Others 176 197 267 299 296 251 272 261 243 238

Total mine production 7,355 7,050 6,381 6,321 6,612 6,861 6,497 6,468 6,136 6,713

Autocatalyst scrap

North America 521 652 794 705 831 961 923 992 1,125 945

Europe 139 200 274 241 306 358 317 334 393 330

Japan 49 59 71 70 83 78 83 100 93 86

China 5 7 10 15 23 33 47 62 79 98

Other regions 35 39 50 46 64 84 103 99 122 146

Total autocatalyst scrap 749 957 1,200 1,077 1,307 1,514 1,472 1,587 1,813 1,605

Old jewellery scrap

North America 1 2 4 3 1 2 3 4 4 3

Europe 6 7 9 9 10 12 12 11 9 9

Japan 47 64 84 25 32 39 29 28 30 27

China 177 108 87 71 129 190 172 181 197 220

Other regions 4 5 8 9 7 7 7 7 8 7

Total old jewellery scrap 234 185 192 116 179 248 223 230 248 266

SUPPLY 8,338 8,192 7,772 7,515 8,098 8,623 8,191 8,286 8,197 8,584

Autocatalyst demand

North America 1,540 1,587 1,279 886 1,220 1,312 1,600 1,649 1,663 1,746

Europe 1,211 1,263 1,181 1,056 1,388 1,591 1,550 1,527 1,617 1,788

Japan 870 897 926 691 822 745 898 877 894 827

China 373 481 478 782 1,032 1,092 1,230 1,405 1,536 1,620

Other regions 439 565 621 607 808 820 861 882 892 906

Total autocatalyst demand 4,433 4,793 4,484 4,022 5,271 5,560 6,140 6,339 6,602 6,888

Jewellery demand

North America 85 99 131 135 115 85 78 75 65 57

Europe 115 129 138 128 138 146 148 149 150 148

Japan 121 98 64 48 48 47 52 54 52 47

China 896 825 837 663 412 341 269 204 172 52

Other regions 64 130 125 135 85 55 48 42 40 43

Total jewellery demand 1,281 1,281 1,295 1,110 797 674 595 525 478 347

Dental demand

North America 199 196 196 190 188 178 170 163 148 135

Europe 80 82 87 91 97 91 83 72 63 59

Japan 294 322 322 305 289 283 278 263 253 242

China 3 3 3 3 2 2 2 2 2 2

Other regions 9 12 12 13 14 13 13 11 10 9

Total dental demand 585 615 620 602 590 567 546 511 475 447

AppENdix 2 - pAllAdiUm SUpply ANd dEmANd 2006-2015

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(000 ounces) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chemical demand

North America 47 60 53 43 53 54 54 55 55 59

Europe 166 199 189 159 160 162 160 160 159 167

Japan 21 22 22 19 21 21 21 22 21 20

China 32 38 46 31 44 66 78 100 77 59

Other Regions 144 69 64 53 90 80 64 73 83 96


Electronics demand

North America 310 308 323 285 334 327 330 289 285 254

Europe 183 191 202 186 218 223 225 207 204 169

Japan 320 321 349 314 373 374 384 345 339 302

China 122 146 164 165 213 225 248 275 272 242

Other regions 285 309 309 290 313 337 313 262 258 242

Total electronic demand 1,219 1,275 1,347 1,240 1,451 1,487 1,500 1,378 1,358 1,209

Retail investment

North America 132 35 68 140 68 47 27 30 35 34

Europe 3 10 26 30 12 14 10 8 6 5

Other regions 0 0 0 0 0 0 0 0 5 6

Total retail investment 135 45 94 170 80 61 37 38 45 45

Other industrial demand including petroleum

North America 57 62 58 52 68 71 78 81 84 87

Europe 16 16 17 16 19 19 19 18 17 18

Japan 8 8 8 8 8 7 7 7 6 3

China 3 2 4 2 2 2 2 3 6 5

Other regions 3 3 4 6 4 2 2 3 4 3

Total other industrial demand 86 91 91 83 100 103 109 110 117 116

DEMAND 8,148 8,488 8,305 7,532 8,657 8,834 9,304 9,311 9,469 9,452



Russia 1,550 900 1,280 1,100 800 800 400 200 0 0

Stillwater 63 0 0 0 0 0 0 0 0 0

industry Stocks 0 0 0 0 0 (50) (100) (500) 600 (150)

EtF release/(build) 0 (280) (381) (507) (1,089) 532 (448) (0) (899) 727

Sub Total - Stock Movements 1,613 620 899 593 (289) 1,282 (148) (300) (299) 577

Net Balance 1,803 324 366 577 (848) 1,072 (1,261) (1,326) (1,571) (290)

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(tonnes) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mine production

South Africa 169.4 157.9 145.4 143.2 147.7 147.4 130.1 135.9 100.2 140.7

Russia 29.5 28.5 25.8 24.7 24.4 25.4 25.0 23.0 21.4 22.4

Canada 7.1 6.4 7.1 5.3 4.0 8.4 6.9 6.8 8.7 7.5

United States 4.3 3.7 3.6 3.8 3.5 3.7 3.7 3.7 3.7 3.8

Zimbabwe 5.2 5.3 5.6 7.1 8.9 10.6 10.4 12.7 12.4 12.4

Others 3.0 3.0 4.0 4.0 3.9 3.6 4.3 4.9 4.8 4.7

Total mine production 218.5 204.8 191.5 188.1 192.3 199.2 180.3 187.0 151.0 191.5

Autocatalyst scrap

North America 15.9 16.4 17.3 12.2 14.0 14.8 12.8 14.4 13.2 10.9

Europe 6.2 7.7 9.2 8.0 9.3 10.8 9.7 11.6 13.4 10.1

Japan 1.7 2.0 2.1 1.7 1.9 1.7 1.8 1.8 1.9 2.0

China 0.1 0.2 0.2 0.3 0.4 0.5 0.7 0.9 1.1 1.3

Other regions 2.0 2.1 2.5 2.1 2.5 3.2 3.7 3.8 4.1 4.6

Total autocatalyst scrap 25.9 28.3 31.3 24.4 28.0 30.9 28.7 32.5 33.8 29.0

Old jewellery scrap

North America 0.3 0.7 1.3 1.0 0.4 0.3 0.3 0.3 0.3 0.2

Europe 0.2 0.3 0.4 0.4 0.3 0.2 0.2 0.2 0.2 0.2

Japan 8.0 13.0 18.0 8.5 8.7 10.7 8.0 7.3 7.6 6.7

China 2.8 3.4 10.4 5.5 6.7 7.5 7.3 7.3 7.8 9.5

Other regions 0.0 0.0 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1

Total old jewellery scrap 11.4 17.4 30.1 15.4 16.2 18.8 15.9 15.3 16.1 16.7

SUPPLY 255.7 250.5 252.8 228.0 236.6 248.9 224.9 234.7 200.9 237.2

Autocatalyst demand

North America 23.6 24.3 17.5 10.8 11.9 14.8 14.0 14.5 15.5 14.4

Europe 59.6 64.5 56.1 39.8 43.9 45.0 39.0 36.8 39.4 41.9

Japan 17.1 15.9 16.1 9.6 11.4 9.5 9.8 9.2 8.7 8.4

China 6.8 6.4 5.7 5.6 6.6 5.7 5.5 6.8 7.5 7.5

Other regions 14.1 14.8 13.9 12.0 17.0 18.1 20.5 21.1 20.9 21.6

Total autocatalyst demand 121.2 125.9 109.3 77.8 90.8 93.0 88.8 88.4 92.0 93.7

Jewellery demand

North America 7.6 6.8 6.4 5.6 6.6 6.8 7.0 7.3 7.6 7.7

Europe 7.5 7.8 7.4 6.9 6.8 6.7 6.6 6.6 6.4 6.4

Japan 20.8 15.0 7.7 8.4 8.1 8.8 10.0 10.2 9.9 10.1

China 31.7 33.3 34.5 60.8 44.8 49.4 54.0 55.2 52.3 48.6

Other regions 1.2 1.3 1.4 1.6 2.1 2.6 2.9 3.0 3.1 3.7

Total jewellery demand 68.7 64.1 57.4 83.3 68.5 74.3 80.4 82.3 79.3 76.4

Chemical demand

North America 2.7 2.9 2.9 1.8 3.0 2.4 2.0 2.3 2.4 2.1

Europe 1.8 2.3 2.3 1.7 2.5 2.8 2.5 2.5 3.1 2.7

Japan 0.8 0.9 1.1 0.9 1.6 1.0 0.7 0.7 1.4 1.2

China 0.8 1.1 1.4 1.2 2.5 3.0 3.2 3.7 4.9 4.7

Other regions 3.7 4.3 2.9 3.1 5.5 5.9 4.1 4.2 6.7 4.6

Total chemical demand 10.0 11.5 10.6 8.7 15.0 15.1 12.4 13.4 18.5 15.4


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(tonnes) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Electronics demand

North America 2.6 2.3 1.4 1.1 0.9 0.7 0.3 0.2 0.1 0.1

Europe 1.1 0.9 0.5 0.3 0.2 0.0 0.0 0.0 0.0 0.0

Japan 2.1 1.7 1.2 1.0 0.9 0.8 0.7 0.5 0.5 0.5

China 0.8 1.0 1.0 1.0 1.2 1.1 1.1 1.0 0.9 0.9

Other regions 5.9 6.5 4.9 4.5 4.7 4.4 4.0 3.5 3.5 3.3

Total electronics demand 12.6 12.3 9.1 7.9 7.8 7.0 6.1 5.3 5.1 4.7

Glass demand

North America (1.0) (0.1) 0.1 0.2 (0.2) 0.4 0.4 0.2 0.2 0.2

Europe 1.5 (0.3) (0.2) (0.5) 0.5 0.3 1.0 0.7 0.3 0.3

Japan 5.2 1.2 3.5 1.0 4.4 3.4 2.6 (2.7) (3.6) (1.2)

China 1.5 3.5 5.5 (2.2) 4.9 1.7 5.1 3.9 0.4 2.1

Other regions 6.7 9.2 6.8 4.4 6.2 4.8 0.9 0.6 1.2 3.7

Total glass demand 14.0 13.4 15.8 2.8 15.7 10.5 10.1 2.6 (1.5) 5.1

Petroleum demand

North America 2.0 1.8 0.8 1.7 0.9 0.9 1.3 1.6 1.0 1.2

Europe 1.6 1.4 1.2 1.2 1.1 0.5 0.5 0.1 0.7 1.7

Japan 0.6 0.4 0.8 0.3 0.7 0.2 0.2 (0.4) 0.2 (0.7)

China 0.1 0.2 0.7 0.1 0.2 0.2 0.3 0.5 0.2 0.2

Other regions 0.9 1.0 2.4 1.7 2.3 2.6 1.6 1.5 1.6 0.7

Total petroleum demand 5.2 4.7 5.9 5.1 5.2 4.4 3.9 3.3 3.8 3.1

Retail investment

North America 1.0 1.2 3.3 4.1 1.3 1.6 2.7 1.7 1.6 1.7

Europe 0.1 0.5 0.9 1.2 0.3 0.5 0.4 0.3 0.2 0.2

Japan (1.9) (1.0) 9.9 4.4 1.1 6.4 4.6 1.3 1.4 12.1

Other regions 0.1 0.0 0.0 0.1 0.2 1.1 1.1 1.1 0.9 0.7

Total retail investment (0.7) 0.7 14.1 9.8 3.0 9.7 8.8 4.4 4.1 14.8

Other industrial demand

North America 6.5 6.3 5.7 5.0 5.4 6.2 7.4 7.7 8.5 8.7

Europe 4.9 5.1 5.1 4.7 5.1 5.7 6.3 6.5 6.9 7.0

Japan 1.6 1.6 1.7 1.4 1.7 1.9 2.2 2.3 2.5 2.4

China 0.4 0.5 0.5 0.9 1.3 1.6 1.6 1.9 2.1 2.5

Other regions 1.0 1.2 1.2 1.3 1.7 2.0 1.8 1.8 1.8 1.9

Total other industrial demand 14.4 14.7 14.2 13.4 15.4 17.4 19.3 20.2 21.8 22.4

DEMAND 245.3 247.3 236.4 208.8 221.3 231.5 229.8 219.9 222.9 235.5

Physical Surplus/(Deficit) 10.4 3.2 16.4 19.1 15.3 17.5 (4.9) 14.8 (22.0) 1.7


industry Stocks 0.0 (6.2) (9.3) 20.7 0.0 (3.1) (9.3) (31.1) 40.4 (1.6)

EtF release/(build) 0.0 (6.0) (3.2) (11.9) (17.9) (4.5) (7.4) (27.7) (6.8) 8.1

Sub Total - Stock Movements 0.0 (12.3) (12.5) 8.7 (17.9) (7.6) (16.8) (58.8) 33.7 6.5

Net Balance 10.4 (9.1) 3.9 27.9 (2.5) 9.9 (21.6) (44.0) 11.7 8.2


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South Africa 88.9 83.3 73.6 77.2 82.3 83.5 74.4 75.6 62.5 82.5

Russia 98.4 94.8 84.0 83.3 84.7 84.1 81.6 78.6 80.3 80.1

Canada 17.3 17.7 16.3 8.7 11.0 17.4 17.3 16.5 18.0 16.1

United States 14.5 13.2 11.9 12.7 11.6 12.4 12.3 12.6 12.5 12.6

Zimbabwe 4.2 4.1 4.3 5.5 6.9 8.1 8.0 9.8 10.1 10.0

Others 5.5 6.1 8.3 9.3 9.2 7.8 8.4 8.1 7.6 7.4


Autocatalyst scrap

North America 16.2 20.3 24.7 21.9 25.9 29.9 28.7 30.9 35.0 29.4

Europe 4.3 6.2 8.5 7.5 9.5 11.1 9.8 10.4 12.2 10.3

Japan 1.5 1.8 2.2 2.2 2.6 2.4 2.6 3.1 2.9 2.7

China 0.2 0.2 0.3 0.5 0.7 1.0 1.5 1.9 2.5 3.0

Other regions 1.1 1.2 1.6 1.4 2.0 2.6 3.2 3.1 3.8 4.5


Old jewellery scrap

North America 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.1 0.1 0.1

Europe 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.3 0.3 0.3

Japan 1.5 2.0 2.6 0.8 1.0 1.2 0.9 0.9 0.9 0.9

China 5.5 3.4 2.7 2.2 4.0 5.9 5.3 5.6 6.1 6.8

Other regions 0.1 0.1 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2

Total old jewellery scrap 7.3 5.7 6.0 3.6 5.6 7.7 6.9 7.2 7.7 8.3

SUPPLY 259.3 254.8 241.7 233.7 251.9 268.2 254.8 257.7 254.9 267.0

Autocatalyst demand

North America 47.9 49.4 39.8 27.6 38.0 40.8 49.8 51.3 51.7 54.3

Europe 37.7 39.3 36.7 32.8 43.2 49.5 48.2 47.5 50.3 55.6

Japan 27.0 27.9 28.8 21.5 25.6 23.2 27.9 27.3 27.8 25.7

China 11.6 15.0 14.9 24.3 32.1 34.0 38.2 43.7 47.8 50.4

Other regions 13.7 17.6 19.3 18.9 25.1 25.5 26.8 27.4 27.8 28.2


Jewellery demand

North America 2.6 3.1 4.1 4.2 3.6 2.6 2.4 2.3 2.0 1.8

Europe 3.6 4.0 4.3 4.0 4.3 4.5 4.6 4.6 4.7 4.6

Japan 3.8 3.1 2.0 1.5 1.5 1.5 1.6 1.7 1.6 1.5

China 27.9 25.7 26.0 20.6 12.8 10.6 8.4 6.4 5.3 1.6

Other regions 2.0 4.0 3.9 4.2 2.6 1.7 1.5 1.3 1.2 1.3

Total jewellery demand 39.8 39.8 40.3 34.5 24.8 20.9 18.5 16.3 14.9 10.8

Dental demand

North America 6.2 6.1 6.1 5.9 5.9 5.5 5.3 5.1 4.6 4.2

Europe 2.5 2.6 2.7 2.8 3.0 2.8 2.6 2.2 2.0 1.8

Japan 9.1 10.0 10.0 9.5 9.0 8.8 8.6 8.2 7.9 7.5

China 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0

Other regions 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3

Total dental demand 18.2 19.1 19.3 18.7 18.4 17.6 17.0 15.9 14.8 13.9


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(tonnes) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chemical demand

North America 1.5 1.9 1.6 1.3 1.6 1.7 1.7 1.7 1.7 1.8

Europe 5.2 6.2 5.9 4.9 5.0 5.0 5.0 5.0 4.9 5.2

Japan 0.7 0.7 0.7 0.6 0.7 0.7 0.7 0.7 0.7 0.6

China 1.0 1.2 1.4 1.0 1.4 2.1 2.4 3.1 2.4 1.8

Other regions 4.5 2.1 2.0 1.6 2.8 2.5 2.0 2.3 2.6 3.0


Electronics demand

North America 9.6 9.6 10.1 8.9 10.4 10.2 10.3 9.0 8.9 7.9

Europe 5.7 5.9 6.3 5.8 6.8 6.9 7.0 6.4 6.3 5.3

Japan 10.0 10.0 10.8 9.8 11.6 11.6 11.9 10.7 10.6 9.4

China 3.8 4.5 5.1 5.1 6.6 7.0 7.7 8.6 8.4 7.5

Other regions 8.9 9.6 9.6 9.0 9.7 10.5 9.7 8.1 8.0 7.5

Total electronics demand 37.9 39.7 41.9 38.6 45.1 46.2 46.7 42.9 42.2 37.6

Retail investment

North America 4.1 1.1 2.1 4.4 2.1 1.5 0.8 0.9 1.1 1.1

Europe 0.1 0.3 0.8 0.9 0.4 0.4 0.3 0.2 0.2 0.2

Other regions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2

Total retail investment 4.2 1.4 2.9 5.3 2.5 1.9 1.2 1.2 1.4 1.4

Other industrial demand (including petroleum)

North America 1.8 1.9 1.8 1.6 2.1 2.2 2.4 2.5 2.6 2.7

Europe 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.5 0.6

Japan 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1

China 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1

Other regions 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1

Total other industrial demand 2.7 2.8 2.8 2.6 3.1 3.2 3.4 3.4 3.6 3.6

DEMAND 253.4 264.0 258.3 234.3 269.3 274.8 289.4 289.6 294.5 294.0

Physical Surplus/(Deficit) 5.9 (9.2) (16.6) (0.5) (17.4) (6.5) (34.6) (31.9) (39.6) (27.0)


Russia 48.2 28.0 39.8 34.2 24.9 24.9 12.4 6.2 0.0 0.0

Stillwater 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

industry Stocks 0.0 0.0 0.0 0.0 0.0 (1.6) (3.1) (15.6) 18.7 (4.7)

EtF release/(build) 0.0 (8.7) (11.9) (15.8) (33.9) 16.6 (13.9) (0.0) (28.0) 22.6

Sub Total - Stock Movements 50.2 19.3 28.0 18.5 (9.0) 39.9 (4.6) (9.3) (9.3) 18.0

Net Balance 56.1 10.1 11.4 17.9 (26.4) 33.3 (39.2) (41.2) (48.9) (9.0)


59

ap

pEN

DICES



South Africa 636 658 631 683 653 647 587 599 449 624

Russia 107 104 89 96 94 95 94 91 87 88

Canada 21 20 23 14 10 24 25 24 22 24

United States 4 4 4 3 3 3 3 3 3 3

Zimbabwe 14 15 15 19 24 27 31 35 36 35

Total mine production 782 801 762 815 784 796 741 752 598 775

Autocatalyst scrap

North America 93 103 116 88 108 124 101 114 144 113

Europe 41 50 60 53 62 72 64 74 83 67

Japan 24 29 33 30 35 34 36 38 42 42

China 0 0 0 0 0 1 1 2 2 3

Other regions 20 20 25 22 26 34 42 44 50 57

Total autocatalyst scrap 177 203 233 193 232 265 244 272 321 282

SUPPLY 959 1,004 995 1,008 1,016 1,061 985 1,024 919 1,057

Autocatalyst demand

North America 319 314 226 147 145 167 179 186 176 176

Europe 184 309 301 238 247 252 223 210 192 194

Japan 186 196 191 134 132 106 118 103 95 88

China 0 0 36 53 67 65 68 77 94 95

Other regions 137 176 180 169 193 157 154 141 117 113

Total autocatalyst demand 826 995 934 740 784 748 741 716 675 667

Chemical demand

North America 15 17 16 15 16 16 16 16 15 15

Europe 20 21 20 19 14 17 18 18 18 19

Japan 7 8 8 7 7 7 7 7 7 7

China 18 21 23 22 28 30 33 36 39 42

Other regions 5 7 6 5 7 8 7 7 8 8


Glass demand

North America 0 3 3 1 12 10 15 11 8 4

Europe 5 (18) (19) 4 (3) 20 3 2 10 5

Japan 27 32 33 10 47 35 16 25 (4) 1

China 0 0 1 3 9 5 16 18 21 15

Other regions 38 59 42 17 37 60 14 37 17 24

Total glass demand 70 76 60 34 103 129 64 92 51 48

Other demand

North America 7 5 4 (3) 11 12 16 19 17 41

Europe 16 14 12 5 10 11 14 17 14 25

Japan 8 6 14 6 8 7 14 16 17 20

China 12 4 44 16 6 2 24 29 42 32

Other regions 2 1 3 1 2 1 3 3 4 4

Total other demand 46 30 77 25 38 35 71 84 95 124

DEMAND 1,008 1,173 1,144 868 996 990 956 977 908 929

Physical Surplus/(Deficit) (49) (169) (149) 140 20 70 29 47 11 128

EtF release /(build) - - - - - (17) (36) (49) (4) 5

Net Balance (49) (169) (149) 140 20 53 (7) (2) 7 133

AppENdix 5 - RHOdiUm SUpply ANd dEmANd 2006-2015

60

ap

pEN

DIC

ES


AppENdix 6 - RHOdiUm SUpply ANd dEmANd 2006-2015


South Africa 19.8 20.5 19.6 21.2 20.3 20.1 18.3 18.6 14.0 19.4

Russia 3.3 3.2 2.8 3.0 2.9 2.9 2.9 2.8 2.7 2.7

Canada 0.6 0.6 0.7 0.4 0.3 0.7 0.8 0.8 0.7 0.8

United States 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Zimbabwe 0.4 0.5 0.5 0.6 0.7 0.8 1.0 1.1 1.1 1.1


Autocatalyst scrap

North America 2.9 3.2 3.6 2.7 3.4 3.9 3.1 3.5 4.5 3.5

Europe 1.3 1.6 1.9 1.7 1.9 2.2 2.0 2.3 2.6 2.1

Japan 0.7 0.9 1.0 0.9 1.1 1.1 1.1 1.2 1.3 1.3

China 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1

Other regions 0.6 0.6 0.8 0.7 0.8 1.1 1.3 1.4 1.6 1.8


SUPPLY 29.8 31.2 30.9 31.4 31.6 33.0 30.6 31.8 28.6 32.9

Autocatalyst demand

North America 9.9 9.8 7.0 4.6 4.5 5.2 5.6 5.8 5.5 5.5

Europe 5.7 9.6 9.4 7.4 7.7 7.8 6.9 6.5 6.0 6.0

Japan 5.8 6.1 5.9 4.2 4.1 3.3 3.7 3.2 3.0 2.7

China 0.0 0.0 1.1 1.6 2.1 2.0 2.1 2.4 2.9 2.9

Other regions 4.3 5.5 5.6 5.3 6.0 4.9 4.8 4.4 3.6 3.5


Chemical demand

North America 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Europe 0.6 0.7 0.6 0.6 0.4 0.5 0.5 0.6 0.6 0.6

Japan 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

China 0.6 0.7 0.7 0.7 0.9 0.9 1.0 1.1 1.2 1.3

Other regions 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3


Glass demand

North America 0.0 0.1 0.1 0.0 0.4 0.3 0.5 0.3 0.3 0.1

Europe 0.2 (0.6) (0.6) 0.1 (0.1) 0.6 0.1 0.1 0.3 0.1

Japan 0.8 1.0 1.0 0.3 1.5 1.1 0.5 0.8 (0.1) 0.0

China 0.0 0.0 0.0 0.1 0.3 0.2 0.5 0.5 0.6 0.5

Other regions 1.2 1.8 1.3 0.5 1.1 1.9 0.4 1.2 0.5 0.7

Total glass demand 2.2 2.4 1.9 1.1 3.2 4.0 2.0 2.9 1.6 1.5

Other demand

North America 0.2 0.1 0.1 (0.1) 0.3 0.4 0.5 0.6 0.5 1.3

Europe 0.5 0.4 0.4 0.2 0.3 0.4 0.4 0.5 0.4 0.8

Japan 0.3 0.2 0.4 0.2 0.3 0.2 0.4 0.5 0.5 0.6

China 0.4 0.1 1.4 0.5 0.2 0.1 0.8 0.9 1.3 1.0

Other regions 0.1 0.0 0.1 0.0 0.1 0.0 0.1 0.1 0.1 0.1

Total other demand 1.4 0.9 2.4 0.8 1.2 1.1 2.2 2.6 2.9 3.9

Physical Surplus/(Deficit) (1.5) (5.3) (4.6) 4.4 0.6 2.2 0.9 1.5 0.3 4.0

EtF release/(build) - - - - - (0.5) (1.1) (1.5) (0.1) 0.2

Net Balance (1.5) (5.3) (4.6) 4.4 0.6 1.7 (0.2) (0.1) 0.2 4.2

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