Both 2020 and 2021 had a very eventful year for PGM Minor Metals. Rhodium, Iridium, and Ruthenium all enjoyed volatile price movement. This post will try to explain why?
First the Precious Metals Basket prices indexed off of January 1, 2021 are plotted below
Key to understanding the set of events that have driven the climb in the PGM Minor metals is understanding:
1) Anglo American's (AMPLATS) ACP Plant Failure
2) Semiconductor Chip Shortage and resulting impact on ICE Vehicle builds
3) AMPLATS mining WIP recovery processing
First of all, AMPLATS had a series of failures at its ACP Plants.
AMPLATS is responsible for 51% of all of S. African PGM mining smelting. They process both their own mined ore, and toll refine materials from other miners as well.
After Mining the ore, the material goes through a Concentration set of processes.
After Concentration, materials then go to Smelting.
After Smelting, materials get processed by AMPLATS Converter Plant(s), called ACP Plant A and B.
Then after ACP, matte grade 90-92% concentrate materials finally complete final refine to 99.9+% purity.
AMPLATS had its ACP plant A fail in March of 2020. Processing was then shifted to their backup Plant B ACP unit. Meanwhile AMPLATS rebuilt its ACP A Plant. In November of 2020, the ACP Plant B then failed., and reliance on the newly refurbished ACP Plant A was used. The mining never ceased. Mining WIP, or work in process, was accumulated in front of the ACP Operations. A Timeline of events is illustrated below.
AMPLATS at the time of the ACP Plant B failure in late 2020 put out a recovery timeline where all of the accumulated WIP would be processed by the end of 2022. AMPLATS far overachieved to that timeline. Below is a plot of the AMPLATS Operations output data from their reported quarterly reports, You can see in this plot that the average 2019 baseline shipments slipped significantly in 2020 with both COVID impacts to mining, and the ACP Plant failures. However, Q2-Q4 2020 we can see just how much AMPLATS overachieved. They shipped well beyond their typical baseline shipments. This leaves the balance of projected shipments for 2022 to be back to normal baseline levels.
Amplats recently acknowledged that they have already processed all of their backlog WIP material. This news article link below caputres this fact.
As I have been telling my clients, after we hit the peak climb in Rhodium, Ruthenium and Iridium due to the supply disruptions created, the back half of that climb saw an oversupply situation and AMPLATS caught up on the backlog of WIP and actually shipped more than normal.
We can slide Rh, Ir and Ru all fall from their peak 2021 price peaks. Rhodium we see now is climbing again as big auto OEM's are buying their Rhodium requirements on the price dip in advance of complete resolution of the semiconductor chip shortage issues.
Iridium is currently fairly tight in supply at the trading houses, while Ruthenium has material on the shelve and could drop a few dollars further.
But Wait, Order Now For Part II PGM Supply Disruption
Now Impala Platinum (IMPLATS) is waring of the need for a furnace rebuild, and warning investors of a second half 2022 supply disruption event.
This essentially is going to be a repeat of the AMPLATS event. Mining wont halt, but mined WIP will accumulate until the IMPALA furnace is rebuilt. Look for Rhodium and Iridium to begin to climb int he 2H of 2022. Keep an eye on the IMPALA furnace rebuild and their formal impact statement to same.