Precious Metals talking points 052022 (a): London Platinum Week and the hydrogen economy

By: Rhona O'Connell, Head of Market Analysis

Fri, 20 May 2022, 14:46

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London Platinum Week and the hydrogen economy

Rhona O'Connell

Head of Market Analysis, EMEA & Asia;

+44 203 580 6115; mobile +44 7384 833 297

rhona.oconnell@stonex.com

Platinum Week and the Hydrogen economy

This week was London Platinum Week; the first time in three years that the key members of the global platinum market have been able to get together. The Seminar was one of the highlights. Two fascinating and complementary presentations were delivered by Graham Evans of S&P Global Mobility and Sam French of Johnson Matthey; the former on the Propulsion Supply Chain and Technology Landscape, and the latter on the role of hydrogen ion achieving net zero – which nicely complemented the Webinar presentation that we delivered a fortnight ago “The Auto Sector; Batteries in the Fast Lane”, but from a much more highly qualified technological standpoint!

One of the key concerns that has been running through industry when it comes to full implementation of net zero emissions from the auto sector is the level of investment in infrastructure and the risk of vicious circles – no market without infrastructure; no market prospects deters would-be infrastructure investment.

It does look as if this is being broken down, but it will continue to need steady progress from the top – i.e. government targets and policies, and potentially investment incentives. In our own webinar we polled our audiences about their expectations for countries reaching their Net Zero targets by the intended deadlines. Interestingly in the EMEA/APAC presentation the split was 40% for 0-20%, and 20% each for >20%-40%;>60% to 80% and >80% - with the >40-60% drawing a blank. In the EMEA AMER presentation the balance was more bearish with no votes for more than 40%; the split was 40% in the zero to 20%, and 60% of the respondents putting a >20-40% probability of targets being met on time.

Our other poll asked for votes on the strongest impediment to achieving targets. The options were: investment levels; government policies; driving range; cost; and infrastructure. In EMEA and the Far East it was 100% infrastructure. In EMEA and AMER it was an even 25% split between four of the five components, with zero voters expecting driving range to be an impediment.

Some interesting insights from the seminar presentations included S&P Global’s expectation that light vehicle sales could reach 100M units by the end of the decade, which would be only roughly 6% higher than the levels in the middle of the last decade. Growth is obviously focused heavily on the electric sector and both presenters underlined the importance of the development of partnership in the battery value chain and likely continued vertical integration further up the supply chain, with respect to raw material suppliers and the OEM manufacturers.

And as far as the supply chain is concerned, we remain heavily reliant on China which is the pre-eminent exporter of batteries by a long way. North America and Europe are both still net importers and there is a clear argument for fresh infrastructure investment in these regions.

The potential difficulties in sourcing sufficient raw materials to support the likely demand for electrified vehicles, with the clear risk of price volatility, plays neatly into the hands of the hydrogen proponents. Our own webinar slides cover this to a point (including the chemistry of electrolysers and of fuel cells), but Sam French’s presentation went into far more depth. Early in his presentation he looked at the likely segmentation of hydrogen demand by 2050, and it was clear that Mobility would be the dominant sector with a rough 40% market share – and that by the same date, hydrogen production would be dominated by renewable sources. At present roughly 95% of hydrogen production is “grey hydrogen”, which is defined as hydrogen produced using fossil fuels. Looking out to 2050, the Johnson Matthey presentation included a graphic that suggests a near exponential fall in the cost of product green hydrogen from electrolysers; source materials water and an electric current.

The consensus from the seminar is that this problem will be solved and that the most likely route is the development of a well-established infrastructure that, by definition, would initially be geared to heavy duty.

And that is good news for platinum. As heavy-duty diesel vehicles are phased out, and with them their platinum particulate filters, so they will be replaced with heavy duty vehicles powered by fuel cells. Added to this, fuel cells use twice as much platinum (currently, at least – thrifting is endemic) as in current internal combustion engines. So it is arguable that as heavy duty vehicles switch across and ICE engines are only being gradually phased out, we could see an upswing in platinum demand before a reduction further out as ICE vehicles leave the stage. One fuel cell-powered heavy duty vehicle fleet has been on the road in China since 2017, there are any number of projects in hand around the world, while Anglo American Platinum is leading the charge among the producers with its fleet of fuel cell-powered mining trucks. We will examine this in more detail in the near future.

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