A ONE-fifth increase in the rhodium price this year could herald a broader improvement in platinum group metal prices (PGMs), said Anglo American Platinum (Amplats).
“The indications in rhodium are that inventories may not be as high as everyone thought and rhodium is always the canary in the coal mine,” said Hilton Ingram, head of marketing for Amplats at a presentation on Monday.
Rhodium is the only PGM that has responded positively this year to reports of low producer refined metal inventories and the possibility that battery electric vehicle market absorption rates may slow.
The price for the metal is $5,575/oz compared to $4,575/oz in January. Ingram said the price uptick was due to higher-than-expected US and China automotive sales, an impending tightening in emission standards in China and an increase in fibre glass prices.
In addition to better demand prospects a seasonal [December] reduction in refined PGMs from South Africa “comes in around now,” said Ingram. “There isn’t terribly much rhodium around,” he added. “Above ground stocks dictate it is not around.”
Ingram was commenting as Amplats presented its prospects ahead of its demerger from Anglo American, expected in May 28 when the platinum business will trade under its new name of Valterra Platinum.
Sanlam Investment Management fund manager Andrew Snowdowne said at the presentation it “felt like” PGM prices were about to improve.
“From where we stand today, unless there is a step down in demand, it actually feels as if prices would have to react if there was a demand for the material because there isn’t the inventory as the producers to meet those contractual obligations,” he said.
Despite this optimism, the palladium price has been largely flat. Said Ingram: “For palladium, its challenge is the short position, but if the physical market turns, that will turn very quickly and price of palladium will move fast”.
Price bullishness was part of Amplats’s playbook today as it talked up its prospects ahead of a possible flowback of shares post the demerger. In addition to the flowback – from shareholders not mandated to hold the stock, or don’t prefer to – Anglo will retain a 19.9% stake in Valterra Platinum which could act as an overhang on the stock.
Asked for his view on how long Anglo’s promised lockup of the residual Valterra stake would last, Amplats CEO Craig Miller replied: “That is still very much part of Anglo’s delibertions. We continue to have those conversations, but they will manage that in a responsible way”.
As Valterra Platinum, Amplats has promised to pay 40% of headline earnings while cutting costs R4bn this year and then between R1bn to R1.5bn in subsequent years. It also said it would conservatively set about capital programmes which had been cut from R11bn in 2023 to between R6bn to R7bn over the next few years.
Sayurie Naidoo, CFO of Amplats, said the company was R1.1bn net cash (including a customer prepayment which would hopefully be renewed). She expected Valterra would remain cash positive as its mines were generating cash, even at current spot prices.
However, a 10% improvement in the average basket price for its metals would equal R7bn in additional earnings, she said.
Valterra would have a leverage ceiling of 1x net debt to Ebitda.
