PGM Comeback? How Recycling & Supply Shifts Impact Platinum, Palladium Investments

The precious metals market is bracing for potential shifts. Will Platinum Group Metals (PGMs) regain their shine?

The Platinum Group Metals (PGM) market, encompassing platinum, palladium, rhodium, iridium, and ruthenium, is currently navigating a complex landscape of shifting supply dynamics, evolving demand patterns, and increasing focus on recycling. After a period of relative calm in 2024, all five PGMs ended the year in physical deficit, signaling a pivotal year of stabilization and supply strain. As we advance into 2025, the question on many investors’ minds is: can PGMs stage a comeback?

PGMs: An Overview

PGMs are a group of six metallic elements (platinum, palladium, rhodium, ruthenium, iridium, and osmium) that share similar physical and chemical properties. These metals are highly valued for their exceptional catalytic properties, resistance to corrosion, and high melting points, making them indispensable in various industrial applications.

Platinum (Pt): Used primarily in catalytic converters for diesel vehicles, jewelry, and various industrial applications.
Palladium (Pd): Predominantly used in catalytic converters for gasoline vehicles, electronics, and some industrial applications.
Rhodium (Rh): Used in catalytic converters to reduce nitrogen oxides, with smaller applications in the chemical industry.
Ruthenium (Ru) & Iridium (Ir): Rising industrial relevance.

The Automotive Industry’s Influence

The automotive sector has historically been the dominant consumer of PGMs, primarily for catalytic converters that reduce harmful emissions from vehicles. However, the rise of electric vehicles (EVs) is reshaping this demand landscape.

EV Impact: Battery electric vehicles (BEVs) do not require PGMs in their drivetrains, leading to concerns about declining PGM demand. In 2024, the automotive sector saw a 4% contraction in fabrication demand for PGMs, the first such drop since the pandemic year of 2020.
Hybrid Resilience: Hybrid technology continues to show strong resilience. Automakers are increasingly relying on hybrid models that still require significant PGM loadings in their catalyst systems. Toyota’s hybrid sales grew by 37% in 2023.
Substitution Dynamics: Automakers have been substituting platinum for palladium in gasoline vehicles due to price differentials. This trend is expected to continue, further influencing demand for each metal. In 2023, >600 koz of platinum was substituted for palladium.

Recycling’s Growing Role

Recycling plays a crucial role in the PGM supply chain, accounting for a significant portion of the annual supply. However, several factors influence recycling rates:

Recycling Rates: Recycling typically constitutes 25-30% of annual PGM supply.
Vehicle Scrappage: Reduced vehicle scrappage disrupts this balance. Lower recovery rates—down by approximately 22% since before the pandemic—support higher primary production prices.
Jewelry Recycling: Jewelry scrap fell by 29 percent for platinum and 45 percent for palladium compared to 2021, underscoring a structural shift in the recycling base amid changing consumer behavior and metal substitution.
Technological Advancements: Advancements in closed-loop PGM processing are revolutionizing platinum group metals recovery from end-of-life products. These novel techniques employ selective dissolution methods operating at lower temperatures and with minimal environmental impact, marking a significant departure from traditional pyrometallurgical approaches.

Supply Chain Disruptions and Geopolitical Factors

Geopolitical factors, particularly those involving Russia, a major PGM producer, can significantly impact the PGM market.

Russian Influence: Russia provides roughly 40% of global palladium production and around 10% of platinum.
Sanctions and Trade Flows: Despite sanctions, Russian metals reach global markets via alternative routes. This dynamic has prompted Western suppliers to explore substitution strategies.
Supply Vulnerability: The global supply chains of palladium, a crucial automotive metal, are heavily dependent on Russia. In 2020, Russia accounted for 41% of world’s mining production and was the leading exporter of refined palladium with a 30% share in global export value.

The Hydrogen Economy’s Potential

The emerging hydrogen economy presents a significant opportunity for PGMs, particularly platinum, due to their catalytic properties in fuel cells and electrolyzers.

Hydrogen Applications: Fuel cells that convert hydrogen to electricity require significant platinum loadings.
Electrolyzer Installations: Electrolyzer installations increased by 47% in 2023, indicating a clear trend.
Long-Term Demand: Although current PGM demand from hydrogen applications is modest, estimated at 80,000 ounces annually, forecasts suggest a potential spike to over 500,000 ounces by 2030.

Investment Strategies and Market Outlook

Investing in PGMs requires careful consideration of various factors, including supply-demand dynamics, technological advancements, and geopolitical risks.

Market Deficits: Looking ahead, 2025 is expected to see continued deficits, cautious price recovery, and evolving demand trends amid constrained supply and geopolitical uncertainty.
Price Forecasts: Metals Focus suggests platinum will average US$970, up slightly from 2024. Palladium is expected to average US$930, down 5 percent year-on-year, while rhodium may rise 8 percent to US$5,000, supported by its deficit and scarce above-ground reserves.
Investor Sentiment: A stark disconnect exists between strong supply-demand fundamentals and investor enthusiasm. Many investors remain cautious despite tightening supply conditions.

Navigating the PGM Landscape

Given the intricate interplay of factors influencing the PGM market, investors should consider the following strategies:

Diversification: Diversify investments across different PGMs to mitigate risk associated with specific metals.
Monitor Technological Trends: Stay informed about advancements in EV technology, hydrogen fuel cells, and recycling processes.
Assess Geopolitical Risks: Closely monitor geopolitical developments, particularly those involving major PGM-producing countries.
Consider Recycling Companies: Explore investment opportunities in companies specializing in PGM recycling technologies.
Long-Term Perspective: Adopt a long-term investment horizon, recognizing that the PGM market is subject to cyclical fluctuations.

PGMs and Legal Considerations

The PGM market is also influenced by legal and regulatory factors, including environmental regulations, trade policies, and sanctions.

Environmental Regulations: Stringent environmental regulations, such as the Euro standards in Europe and the China standards, continue to tighten, automakers must use more PGMs to meet these requirements.
Trade Policies: Trade policy shifts, such as new tariffs, could trigger a price rally in PGMs.
Enforcement: Enforcement of regulations related to emissions and recycling can impact PGM demand and supply.

Conclusion

The PGM market is at a crossroads, with both challenges and opportunities on the horizon. While the rise of EVs poses a threat to traditional PGM demand, the growth of hybrid vehicles, the hydrogen economy, and advancements in recycling technologies offer potential avenues for growth. By carefully monitoring market dynamics, assessing risks, and adopting informed investment strategies, investors can navigate the PGM landscape and potentially capitalize on the opportunities that lie ahead.

Considering investing in PGMs? Contact our firm for a consultation to discuss your investment goals and risk tolerance.