POLITICAL ECONOMY
Where Does Demand Occur? Ford Motor Co. stated in July that it
These globalizing trends, financial market deregulation, the inter- could commercialise hydrogen engine
nationalisation of manufacturing and corporate structures, the rise vehicles by 2012, if only the hydrogen
of the shipping container, computerization of manufacturing and storage and delivery industry were in
logistics, and much more, all mean that geographic divisions are far place. It will not be, at least not by then.
less meaningful in analysing markets than ever before. If the hydrogen were produced outside
For example, the geographic demarcations of demand for precious of the vehicle and supplied to the
metals are far less meaningful today than they were two decades engine via a solid, safe, metal hydride,
ago, and they will continue to be less informative about conditions such a vehicle would not need any
in the precious metals markets. Fabrication demand is already occur- PGMs in a catalyst or in a fuel reformer.
ring in more places than in the past, and will continue to do so. There
has been a decline in the centralisation of global manufacturing in The Future of Mining
the US, Europe, and Japan. Mining continues to diversify, as coun-
tries open themselves up to develop-
... we also are seeing that more money is being
ment and foreign direct investment. As
spent on exploring for and developing governments have adopted policies
metals mines than ever before
more conducive to investment in min-
ing, both from domestic and interna-
It is now far less informative to say that 100 ounces of platinum tional investment sources, mining and
are being bought for use in autocatalysts for use in Japan, or 100 exploration have flourished.
ounces of platinum are being bought in Japan for use in autocata- In recent years the amount of gold
lysts. Japanese auto manufacturers may buy platinum group metals being mined in traditionally major gold
in the US, for manufacture into plating salts in Asia, for use in man- mining countries has contracted, while
ufacturing autocatalysts in Europe or South Africa, for installation on the amount being mined in newly
automobile exhaust systems in China, that go onto cars made in emerging producing nations has
Canada for sale in Europe. So, where is this demand? Is it in the US, expanded. These trends may continue,
or Europe, or any other point in between? The answer is that it actu- although there are signs that some of
ally does not matter to the market. the traditional mining nations will
reverse their declines.
Green Trends & PGM Demand Related to this, much attention is
There is a growing body of writing about how the move toward focused on China as a user of metals.
cleaning up the environment will help boost demand for platinum China is also growing as a producer of
group metals. For the past 30 years at least we have heard that fuel metals on both a mined basis and in
cell vehicles will require 500,000 to 1 million ounces of platinum per terms of refined metal. China may sur-
year within a decade. Maybe someday they will. pass Mexico, Peru, and Australia to
For the next decade, at least, the growing auto population world- become the world’s largest silver miner
wide, the spread of emission standards, and the tightening of emis- by 2010. It may surpass South Africa,
sion standards may combine to push the demand for platinum, pal- the US and Australia to become the
ladium, and rhodium sharply higher. However, the future of auto- world’s largest gold producer by 2015,
motive use of PGMs is not necessarily a one-way street. The or possibly sooner.
announcement by Nissan Motors in July that it would cut its per- With the resurgence in metals prices
vehicle PGM use in half on some vehicles starting in 2008, due to a over the past five years, we also are see-
technological change in how it applies the PGMs to the substrate, ing that more money is being spent on
illustrates this and emphasises that changes can emerge more exploring for and developing metals
quickly than in the past. However, as long as automobiles are pro- mines than ever before. This will lead to
pelled by internal combustion engines burning gasoline or diesel another major round of expansions in
they should be expected to require PGMs. production in all major base and pre-
As a result, these metals will become even more dependent on cious metals. It is happening now. The
autos as a source of demand. Auto use of platinum has risen from effects in terms of increases in supply
30% of platinum demand in the early 1980s to around 60% today. will be seen over the next decade or
Autos account for more than half of palladium use now, up from less longer.
than 10% in the early 1980s, and they take up 87% of world rhodi- Gold mine production has doubled
um use. One must be cognisant of the possibility that in the longer- since 1980, the result of the effects of
term autos may not need PGMs. the sharp increase in gold prices in
If, someday, motive power shifts to something else, PGMs might 1979/1980, and the fact that prices
become far less necessary. A hydrogen engine, such as the one now stayed above US$320/oz for most of
used in conjunction with a gasoline engine on the BMW Hydrogen7 the period from 1980 through 1997.
production passenger sedan, or under research at various other auto Almost all of that growth came from
companies, would not need any PGMs in a catalyst. gold mining companies that did not
COMMODITIES NOW SEPTEMBER 2007 51
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