Platinum loses shine amid BHP’s vast Anglo bid

The switch to electric vehicles means platinum — used in the manufacture of catalytic converters for high-polluting petrol engines — faces a dim long-term future – Copyright AFP/File Kyle Grillot

Lucie LEQUIER

Platinum prices are rising due to tight supplies although the metal has fallen out of favour as miner Anglo American seeks to offload assets and fight a vast takeover bid from Australian rival BHP.

The metal is used in the manufacture of catalytic converters for high-polluting petrol engines — but demand has long been forecast to slump as more drivers switch to greener electric cars.

This gloomy outlook sent prices tumbling by a third between early 2021 and last month, although they have staged a recent rebound on tight supplies.

“Quite a few mining companies have moaned about it (platinum) being in a depressed state but the outlook is brighter,” AJ Bell analyst Dan Coatsworth told AFP.

London-listed Anglo American is meanwhile seeking to emulate BHP’s strategy and switch focus toward the global boom in copper, at the expense of platinum.

– Crunch deadline –

BHP faces a Wednesday deadline to either increase its twice-rejected multi-billion-dollar offer for Anglo, walk away, or launch a hostile takeover at enormous risk.

As part of its takeover tilt, BHP wants Anglo to split off subsidiary Anglo American Platinum — one of the biggest producers of platinum group metals which operates in South Africa and Zimbabwe.

Anglo last week rejected BHP’s improved bid worth £34 billion ($43 billion) — and announced its own plans to offload its platinum business, as well as steelmaking coal and diamond activities.

The decision was aimed at creating “a radically simpler business”, said Anglo chief executive Duncan Wanblad who expressed “full confidence” in platinum.

Earlier this year however, London-listed Anglo American announced thousands of jobs cuts at South African platinum operations, blaming low prices.

The British company, which has massive copper assets in Chile and Peru, still wants to capitalise on rocketing demand and prices for the base metal.

“Anglo now needs to convince investors that it can have a growth strategy all of its own that provides value for its shareholders,” XTB research director Kathleen Brooks told AFP.

“This means essentially replicating what BHP would have done: ditch platinum and diamonds in favour of the more lucrative copper assets.”

– AI, green tech –

The price of a tonne of copper has surged by around 27 percent since the start of the year, blazing a record-breaking trail.

The industrial metal is widely regarded as vital for the development of cutting-edge artificial intelligence (AI) technology.

And it is essential to the world’s transition to renewable energy because it is a vital component for greener equipment like energy storage, electric vehicles, solar panels and wind turbines.

“The focus towards copper makes sense for global mining companies right now,” added Brooks.

“Copper is vital for electricity generation, and the world needs a huge amount of new electricity infrastructure to cope with the AI boom that is coming down the line. Copper is a vital ingredient for the AI future and Anglo can profit handsomely.

“Added to this, copper is also vital for the future of renewable energy.”

– Tight platinum supplies-

Despite the longer-term downtrend, platinum prices have swung higher in recent weeks due to “the prospect of a rising supply deficit this year and the next”, said Saxobank analyst Ole Hansen.

Demand is expected to outpace supply by 476,000 ounces this year, according to a recent forecast from the World Platinum Investment Council (WPIC), making it the second straight annual deficit.

Supplies are tight as a result of declining output in key producers South Africa and Russia, and this situation is expected to continue.

Sliding prices in recent years have sparked cost-cutting and production cutbacks in South Africa.

Russian output has been hit by maintenance activities and the impact of Western sanctions following its invasion of Ukraine.

Global platinum supply is forecast by WPIC to slide one percent this year to 7.11 million ounces compared with 2023. Demand is expected to shrink five percent to 7.58 million ounces.