CITIC SEC: Continued Shortage of Platinum Group Metals, Extensive Space in the Recycling Market

CITIC SEC released a research report stating that China's platinum group metal resources are extremely scarce, with a wide variety and high grade of secondary resources. The importance of platinum group metals in China's industry is increasing. The China National Recycling Association Precious Metal Working Committee plans to achieve a platinum group metal recovery volume of 70 tons by 2027, with a self-sufficiency rate of 45.0%. According to calculations, the platinum group metal recovery market size is expected to exceed 20 billion yuan by 2028, with the recovery volume in the petrochemical, fine chemical industry, and automotive catalyst areas expected to increase to 25.2/48.9 tons. It is forecasted that platinum group metals will continue to face shortages, and prices may remain on an upward trend, benefiting the platinum group metal recycling industry. Key points from CITIC SEC are as follows: Platinum group metals are facing continuous shortages, and prices may rise in the long term. Based on Metal Focus data, there was a shortfall of 25.6 tons of platinum in 2023. Metal Focus and WPIC predict that global platinum demand may reach 214.5/232.8 tons in 2024/2025, with supply at 201.0/213.6 tons. There is expected to be a shortfall of 29.3 tons of platinum supply globally in 2024. Referring to previous predictions for fuel cell vehicles and electrolyzers, it is estimated that global platinum demand may reach 257.6 tons in 2030, with supply at 219.4 tons, leading to a potential shortfall of 38.2 tons. With a long-term supply-demand gap, platinum prices are expected to remain strong. China's platinum group metal resources are scarce, and there is an urgent demand for platinum group metal recycling. According to data from the Ministry of Natural Resources, China's platinum group metal mineral reserves were 80.91 tons in 2022, accounting for 0.11% of global reserves. Platinum group metals are extremely scarce, and secondary resources are diverse and high-grade, playing an increasingly irreplaceable role in the industry. According to the China National Gold Group Gold Jewelry Association Platinum Palladium Branch, the total supply of platinum in China in 2023 was 103.9 tons, with mining production, recycling regeneration, and imports accounting for 1.6%, 10.6%, and 87.8% respectively. According to the plan of the China National Recycling Association Precious Metal Working Committee, the goal is to achieve a platinum group metal recovery volume of 70 tons by 2027, with a corresponding 2023-2027 CAGR of 58.8%, and a self-sufficiency rate of platinum group metals increased to 45.0%. The production of platinum group metal waste catalysts in the petrochemical and fine chemical industries is expected to grow rapidly. Over 85% of chemical reactions in the production of chemical products are carried out under the action of catalysts. Due to poisoning and other reasons, catalysts gradually lose their catalytic activity and need to be replaced regularly. In addition, as ineffective catalysts are considered hazardous solid waste, their transfer and export are becoming increasingly difficult. The "14th Five-Year Plan" is a major cycle for chemical investment and environmental protection upgrades. It is estimated that the production of platinum group metal waste catalysts in China will be 9539/14833 tons in 2026/2028. This corresponds to a platinum group metal recovery volume of 14.3/25.2 tons in the petrochemical and fine chemical industries, with a CAGR of 24.1% from 2022 to 2028. The peak of automobile scrappage is coming, with a wide space for platinum group metal recovery in the field of automotive catalysts. China's automobile ownership increased rapidly from 2009 to 2014. Based on a scrappage period of 10-15 years, 2024 will see the peak of automobile scrappage. In March 2024, the State Council proposed in the "Action Plan to Promote Large-scale Equipment Updates and Incentives for Old-for-New Consumption" that by 2027, the amount of scrapped vehicles will increase by about twice compared to 2023. According to data from the China Association of Automobile Manufacturers, the number of scrapped vehicles in China in 2023 was 7.56 million, a year-on-year increase of 32.4%. It is estimated that by 2028, the number of scrapped vehicles will increase to 17.4 million. The platinum group metal recovery volume from scrapped vehicle tailpipe catalysts in China is projected to be 28.8/48.9 tons in 2026/2028, with a corresponding CAGR of 20.4% from 2023 to 2028. Risk factors: Risks of platinum group metal price fluctuations; risks of slower-than-expected growth in the number of scrapped vehicles; risks of lower-than-expected implementation of emission standards; risks of slower-than-expected development of the hydrogen energy industry.