Platinum miners face demand destruction as battery electric vehicles win market share as part of the energy transition, but there is hope that budding hydrogen-related platinum use may come to the industry's rescue.

Platinum and palladium miners have long enjoyed a secure market in catalytic converters, which use platinum group metals to remove pollution from the exhaust of internal combustion engine vehicles. That source of demand is set to decline as consumers adopt pure electric vehicles, which have no emissions and need no platinum.

However, the World Platinum Investment Council (WPIC), an industry trade association, hopes the tiny but growing market for hydrogen in the transportation and energy storage sector could emerge as a major new source of platinum demand, helping offset potential market share loss to EVs.

The WPIC expects the use of platinum-intensive proton exchange membrane (PEM) electrolysis to jump by 250% in 2023, and hydrogen infrastructure deployment demand to increase by 22%, according to a report published Nov. 21, 2023. PEM electrolysis is one way of producing hydrogen and depends on platinum as a crucial component in helping split water molecules.

Meanwhile, the WPIC reported a fivefold year-over-year increase in the production of fuel-cell electric vehicles (FCEV) in Europe in the third quarter, to a still modest 300 units. FCEVs contain platinum and are powered by hydrogen.

While some analysts doubt that hydrogen use will drive significant platinum demand in the near future, the WPIC and platinum miners pin projected demand growth on the back of hydrogen electrolysis and FCEVs.

"Off a small base, they are growing quite quickly," Ed Sterck, director of research at the WPIC, told S&P Global Commodity Insights.

EV invaders

At least for now, autocatalyst demand has been on the rise as tougher rules on emissions push automakers to use more platinum group metals to remove more pollution, according to the WPIC. Meanwhile, sales of platinum-intensive hybrid electric cars have also boosted platinum demand, the WPIC said.

The automotive sector is expected to account for 40% or 3.3 million ounces of 2023 demand for platinum, which is also used by other industries including fiberglass makers, according to a WPIC estimate.

The WPIC and platinum miners know that cars with internal combustion engines could eventually lose a lot of market share to battery electric vehicles (BEVs). EVs are projected to account for 35% of car sales in 2030, according to the International Energy Agency's 2023 EV outlook. In 2022, EVs accounted for 14% of new cars sales, the report said.

With their catalytic converter business waning, platinum miners are hopeful that hydrogen use in engines and fuel cells will prop up demand for the precious metal. Hydrogen is already in use in some cars, and it may offer a low-carbon offramp for heavy trucks and cargo shipping.

Hydrogen production, as well as fuel cells, can be platinum-intensive. The metal is used as a catalyst for critical chemical reactions that drive electrolysis to release hydrogen and hydrogen-consuming fuel cells to produce electricity.

"Hydrogen has a significant and wide-ranging systemic role to play in achieving a low-carbon future and is a key driver for the deployment of renewables-based power generation systems," a spokesperson for Anglo American PLC, a platinum mining heavyweight, said in an email.

While FCEVs and broader energy-transition-related hydrogen production have yet to gain much market share, platinum industry proponents expect that to change.

The WPIC expects platinum demand from broad commercial adoption of FCEVs to add over 3 million ounces of annual platinum demand within about a decade, rivaling the current needs of autocatalysts. Meanwhile, emerging hydrogen production will also boost growth.

Hydrogen-related demand for platinum in electrolyzers is expected to account for a "very small" proportion of overall industrial needs in 2023, the WPIC said in its November 2023 report.

"By 2030 ... our current number is around 430,000 ounces of [platinum] demand for electrolyzers alone," Sterck said, noting the figure is dependent on the delivery and timing of electrolyzer projects.

Platinum industry advocates expect increasing policy and funding support from governments to boost hydrogen.

"With the policy space also increasingly supportive — whether via the hydrogen hubs of the US' Inflation Reduction Act, or the mandated hydrogen refueling station construction of the EU's Alternative Fuels Infrastructure Regulation — we see the importance of [platinum group metals] to enabling net zero ... only growing," the Anglo American spokesperson said.

Among other initiatives, BMW Group has launched a pilot fuel-cell vehicle in the iX5, and Toyota Motor Corp. has announced a FCEV version of its Crown sedan, the spokesperson said.

Projection obstacles

Whether potential hydrogen-related demand for platinum materializes remains an open question, as different technologies jockey for consumer and industrial preferences.

BEVs clearly have a leg up on FCEVs so far, and that does not look set to change, according to some analysts.

"[Fuel cells] are ten times more expensive than a hydrogen engine, and five times more expensive than an internal combustion engine, and three times more expensive than a battery pack for an electric vehicle," said Jeffrey Christian, managing director of CPM Group, a consultancy that tracks and analyses platinum group metals. "So it's extremely expensive ... with a lot of risks."

Christian projects modest growth and much further out. The number of light-duty passenger FCEVs will only exceed 50,000 in the 2040s and grow to about 400,000 units in 2050, according to CPM Group's projections. Most of the demand will come from bus fleets at places like airports, Christian said.

Meanwhile, the amount of platinum demand coming from the hydrogen electrolysis industry will depend on which technologies it adopts. The WPIC sees about a third of hydrogen electrolysis depending on platinum-intensive PEM technology, with the balance coming from alkaline electrolyzers, which do not contain platinum.

"There's some potential variability there," Sterck said.

If hydrogen-related demand for platinum does not emerge, Christian expects prices to decline. But that may end up making the metal more appetizing for other purposes.

"I think that there will be new technologies that emerge [to] use platinum, palladium and rhodium," Christian said, referencing two other platinum group metals used by the automotive sector. "But they will use them because they're much cheaper than they are today."