Its an interesting area and Pt isnt the only element that is being chased to be substituted on the basis of its high cost.Nor is this the only way in which research has investigated ways to replace Pt in converters.It has been an ongoing area for research for a while now.
The huge problem the researches have is that mnay of these technonogies are in their infancy and are years away from being practicaly applied to modern vehicle emmisions.
If you have a closer look at how these technologies work they are quite chemically complex and require systematic site specific reactions.That is they need certain chemical reactions to take place in a certain sequence for the whole process to work properly.There are nearly ALWAYS scale-up problems with such technologies.
Given the conservative nature of the motor vehicle industry,and one just has to look at recent alternative modes of power developments in the auto industry,that being primarily hybrid motor vehicles,it is the nature of this industry to stick with known technology until newer technonogy is unequivocally proven.
One also now has another major form of Pt demand developing in the form of ETF's.Even if a significant part of Pt demand is substituted in the coming decade there will always be demand for the metal on the basis of a hedging investment,just like gold.In fact one might eventually envisage Pt becoming predominantly this type of investment rather than having strong industrial ties.This will all be due to its relative rarity in the general environment.
We have seen very strong demand for gold worldwide as the $US continues to devalue.In essence people dont have a great deal of faith in the $US as a hedge against risk any more.The precious metals are once again coming to the fore as the major form of collateral against risk.Its one of the benefits of Pt in that it has this dual nature to its demand.
From the recent GFMS report on PGM demand/supply one must conclude that the major price influence on Pt of late has been the ETF demand, and its hard not to deny with good surplus of Pt for 09 yet a continuing strengthening of the Pt price.
There has previously been no formal stocks of Pt, probably due to that dual demand nature of Pt.This has probably contributed to the volatile nature of its price as well.But now we are seeing these ETF's growing there will have to be some form of stocks to back such ETF's.
Imo this is all leading to Pt perhaps having an eventual higher base level of support due to its more significant role as a form of hedging investment based on its rarity.Its been interesting to watch the price of Pt over the last few months and it is plain to see that there is no one nation buyng Pt up.Its Chinese-Asian/US and euro inspired.
I find it hard to believe that there would be such investment in Pt on the basis of forward motor vehicle demand alone and even harder to believe Xstrata would be looking to aim to move into producing around 1 million ozs/yr on such a purely industrial based demand.
One of the important factors with the Garatouw project is the relatively low production cost in relation to the relatively shallow depth of the potential mining operation.In the years to come the mineable reserves of Pt will only get deeper and the large open cast ops will have to move to higher cost underground ops.Miners are now looking to open up mines that have good grades down to around 1000Mtrs depth as these do not require power sapping deep air circulation or even worse,air cooling/conditioning plants.
We are also seeing an increase in Pt price possibly due to the market factoring in the higher power/infrastructure costs that will be filtering through in the next few years in Sth Africa.If there's no increase in power output there's no increase in PGM output as has been witnessed in the last few years.The Sth African must spend on their power infrastructure and this will ultimately cost the mining industry who are a large net user with major smelting and processing ops in the country.
In essence the net drivers of the Pt price currently outway any negative price factors and its hard to see this changing in the long term for the reasons above.
d.
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