Fueling Hope for the Platinum Industry: Will Hydrogen-Powered Vehicles Drive Platinum & Palladium Demand?

2018 is turning out to be a pretty bad year for Platinum Group Metals (PGMs). Platinum, in particular has taken a sound beating with its prices falling a full 10% as compared to Gold’s 10% and Silver’s 6%. 

After close to a month of free falling, has PGM prices hit rock bottom? Can fuel cell technology save the day? Or are we still grasping at straws? Read on to form your own opinion. 

The platinum industry is keeping a close watch on the development of fuel cell technology like their lives (or rather, livelihood) depended on it. In fact, the world’s three largest platinum producers – Anglo American Platinum, Impala Platinum and Lonmin – have all invested heavily in fuel cell technologies related projects, especially in the development of fuel cell vehicles.

So, what is a fuel cell and how does it work?

Without going into a detailed chemistry lesson, a fuel-cell (FC) is an electro-chemical energy conversion device that generates electricity by converting hydrogen and oxygen into water, using platinum as a catalyst. Besides electricity, the reaction only produces heat and water vapour, making FC a green, viable source of energy.

FCV vs EV: The story so far

In an effort to curb carbon emissions, many governments from major economies including the world’s largest car producer and seller, China, have pledged to ban the production and sale of fossil-fuel vehicles in the mid-long term. Auto-manufacturers have also been quick to respond by ramping up efforts to produce electric vehicles (EVs) rather than fuel cell vehicles for these markets. Reasons will be discussed below. 

Since EVs do not have a combustion engine, they do not require catalytic converters, which takes up 42% of global platinum demand and over 75% of palladium demand as per 2017. Needless to say, the advent and adoption of EVs will have catastrophic effect on PGM demand as well as the scrap catalytic converters recycling business. The latter is likely to face the twin challenge of falling prices due to diminished demands and supply shortage in the long run. 

While EVs have captured the world’s attention, especially with Elon Musk’s Tesla, Fuel Cell vehicles (FCVs) are losing momentum due to a variety reasons including lack of refueling infrastructure, a more complex manufacturing process and expensive raw materials like platinum. Most FCVs require a little well over 28g of platinum while the average gasoline and diesel vehicle only has 2- 4 grams PGM loading.

What advantages do FCVs have over EVs?

Notwithstanding the heftier price tag, vehicles utilizing FC do have two significant advantages over EVs – superior range and fast refueling times. This provides a driving experience and convenience similar to fossil-fuel vehicles.

These advantages are even more apparent when it comes to heavy duty, long-distance transport vehicles. The longer range of fuel cells makes it ideal for frequent long-haul trips, and the quicker refueling means shorter vehicle downtime and more vehicle utilization. As for refueling infrastructure (or the lack of it), refueling stops can be cost-efficiently centralized along the routes these modern work horses frequent. Hence, we can expect FCV to penetrate the heavy-duty vehicle sector easier than the light duty one, where EV is gaining both mindshare and market share.

What factors will affect the FCV’s adoption?

Despite Elon Musk calling hydrogen fuel cell “incredibly dumb”, most major car manufacturers are still pushing ahead with FCVs. Daimler has the Mercedes GLC F-Cell, Toyota has Mirai (Japanese for ‘future’), and Honda has its Clarity model. Toyota will also be rolling out FC trucks, which are more economically viable. 

BMW, General Motors and Kia have also announced plans to sell FCVs by 2020.

Since FCV can’t be refuelled at home, accessibility to refueling infrastructure will be vital for it to take off.  

As of mid-2017, the United States has 62 operational hydrogen refueling stations, and projects to have 120 retail stations by 2025.

Japan has adopted a more aggressive stance, aiming to reach 160 stations by 2020, 320 by 2025 and 900 by 2030. The country also aims to accumulate 800,000 FCVs by 2030.

Meanwhile, Germany is working towards 400 stations by 2025, which will give most German residents access to stations within a 10-minute drive. 

The United Kingdom aims to have 65 stations by 2020 and will let future goals be based on future demand. The country may build up to 1,100 stations to cater to demand should FCV population grow to the projected 1.6 million.

If the world’s major automotive markets continue to support FCVs, we can expect other markets to follow suit, and see a rise in FCV adoption globally. 

The price tag of FCVs is also a deterrent, which on average cost significantly more than EVs. For instance, the Mira’s MSRP is in the range of USD 58,000 while Chevrolet’s Bolt BEV starts at about USD 37,000. This is primarily due to the amount of platinum used in the fuel cells. To keep the price competitive for consumers, car makers are finding ways to slash the amount of the expensive metal used. Ironic, isn’t it? This means the technology may not deliver the surge in demand for platinum or palladium that has long been flagged by some PGM producers and analysts.  Although it isn’t exactly the silver lining that the Platinum industry and PGM recyclers are hoping for. it’d still be a better scenario than the complete domination of EVs in the automotive market. 

What does this mean for PGM recyclers?

PGM recyclers are extremely reliant on recycling scrap catalytic converters to recover the precious metals within. Be it EVs or FCVs, it is almost certain that there will be less catalytic converters available for recycling in the mid to longer term.

Additionally, the platinum-heavy fuel cell vehicles are growing much too slowly to offset falling autocatalyst demand. While the hybrid and electric cars made up about 1.1% of global automotive sales, the market share of fuel cell vehicles is trailing far behind at about 0.015%. Hence, the demand for platinum from FCVs could replace only about 10-20% of demand from the car industry at best, which currently takes up more than 40% of platinum demand from gasoline and diesel catalysts. Even if hydrogen electric technology preserves some automotive demand for platinum and palladium, the share of the overall automotive demand will shrink significantly. 

Hence, there’s no better time to consider future-proofing our business and look to recycling materials that are integral to the manufacturing of vehicle batteries or other options in this article.

Are you a PGM recycler? What steps are you taking to prepare for the future? Share with us at info@brmetalsltd.com. We’d love to hear from you.