Technology and market perspectives on the automotive demand for platinum group metals

13 December 2016
Technology and market perspectives on the automotive demand for platinum group metals

Based in Cape Town, Coronation Fund Managers is one of the largest independent asset managers in South Africa. Platinum group metals represent an important sector for the country’s economy, and they make up a sizeable proportion of Coronation’s investable universe, with significant holdings in companies active in the sector.

Neill Young is a portfolio manager for Coronation. His responsibilities include analysing sector companies and predicting the future demand for platinum group metals. “We already have a very good handle on the supply side of the industry,” he says, “but it is important for us to understand future demand too. Our interest in investment terms is longer term – we are not talking month to month as much as five to ten years out.

“The automotive catalysis industry is a major driver for platinum group metal demand internationally,” continues Young, “so it’s important for us to understand this. With the happenings of last year – in particular, the ‘dieselgate’ saga – our attention was focused very sharply on the future of the diesel engine and the expectations in this respect of the major OEMs longer term.”

Young was not previously aware of Ricardo but had attended a conference in London in July 2015 at which a presentation was given by the company’s chief technology and innovation officer, Professor Neville Jackson. It was the technical depth and accessibility of the presentation that led Young to seek to commission a bespoke study on the future automotive demand for platinum from Ricardo’s Advanced Technology Development team.

In addition to requesting a thoroughgoing analysis of the automotive technology trends that would influence future platinum group metal demand for automotive catalysis, Coronation sought some in-depth guidance on the likely disruptive technologies that might emerge in the electrified vehicles sector. This information would provide valuable insights into the thinking underlying the headline technology roadmap projections contained in the Ricardo report. To this end, Young and his colleagues provided a list of technical questions in advance for the Ricardo team to address in their research.

The project team sought inputs from the engines, hybrid and electric systems and automotive catalysis teams from across Ricardo’s European and North American operations. The final report, running to 118 pages, explained the Ricardo view of the key technology drivers influencing the demand for platinum for automotive catalysis. High-level descriptions of the many competing automotive powertrain technologies and their key characteristics were provided in a highly accessible manner, targeted at providing understandable and actionable information to the non-engineer reader. Also included were technology roadmaps showing Ricardo’s considered opinion of the timing and nature of the roll-out of disruptive technologies, and detailed responses were provided to Coronation’s specific questions.

“The predicted mix of engines is very important to us at an immediate level,” explains Young, “as diesels use more platinum in their catalysis while gasoline engines use more palladium. Given that South Africa is a much bigger producer of the former, it’s crucial for us to understand this. Longer term, a further consideration for us is the pace of development of battery technology and how far this has to go before electric vehicles can substitute for a much larger part of the automotive market. We now have a better feel as to where this is heading.”

“The report was very comprehensive and has provided a useful reference for us,” he continues. “It was slightly more technical in some respects than we expected, but I don’t see that as a negative as it helped us to build our knowledge. It was very much what we were looking for.”

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