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Viewpoint: PGM demand from hydrogen sector to rise
Viewpoint: PGM demand from hydrogen sector to rise
London, 20 December (Argus) — Demand for platinum and iridium from the hydrogen industry will rise in 2025, albeit at a slower pace than anticipated because of delays to hydrogen project development. Demand from the hydrogen industry for platinum group metals (PGM) has increased significantly in recent years. The World Platinum Investment Council (WPIC) reported a 123pc increase in demand for platinum from hydrogen applications year on year on 26 November, from a small base. The WPIC anticipates a further 32pc growth in 2025. PEM electrolysers and hydrogen fuel cells both utilise platinum and iridium, opening up a new end-market for some PGMs. Demand from hydrogen applications may offset falling autocatalyst demand from the automotive industry in the long term. Hydrogen industry demand for platinum, iridium and ruthenium will also support demand for palladium, even though palladium is not utilised in hydrogen applications. As demand for platinum from the hydrogen industry increases, palladium will increasingly be substituted for platinum in internal combustion engine (ICE) vehicles, increasing automotive palladium demand and lifting PGM prices overall. More than $300bn in global hydrogen investments are earmarked through to 2030. Many governments seeking to reach their ambitious climate goals are investing in hydrogen, with 61 governments adopting hydrogen strategies as of 2024. "We know that all areas of the world will not shift to hydrogen in the same way as Europe, but we see technology advancing and costs falling, which gives us confidence that the hydrogen economy will be a big driver for platinum and iridium demand in the future," Heraeus Precious Metals Germany head of trading Dominik Sperzel told Argus . According to the WPIC, 11pc of global platinum demand will come from hydrogen application in 2030, totalling 900,000oz. By the late 2030s hydrogen energy production is expected to be the largest end-market for platinum, with 3.5mn oz of demand expected by 2040. "We have seen the hype over the past four to five years. Iridium prices started to increase in 2020 because of supply disruptions and on the demand side, people were excited about new technology announcements and projects entering the pipeline," Sperzel said. Johnson Matthey iridium prices increased by 285pc from the start of 1 June 2020 to 1 June 2021, reaching a peak of $6,300/troy ounce (toz). But they have since fallen by 29pc to $4,450/toz on 12 December as hydrogen demand failed to meet expectations. The development of the hydrogen economy has underperformed in recent years relative to expectations, and expected demand for PGMs has not yet materialised, according to PGM market participants. Many hydrogen projects remain unfinanced, and much of the hype has since abated. There are several challenges inhibiting the development of a widespread hydrogen economy, including the lack of existing infrastructure for hydrogen delivery. Another has been the availability of government subsidies, as significant funds have been earmarked for hydrogen investment but not yet disbursed. "Since 2022 to this year, subsidies available for green hydrogen projects have gone from $50bn to $300bn, but the funds haven't been flowing until early this year. It was only in June that the first of the European subsidies really began to be distributed to support the construction of these facilities. Now that subsidies are beginning to flow, development will accelerate quickly, driving consumer demand for fuel cell electric vehicles," World Platinum Investment Council research director Edward Sterck told Argus . The outlook for hydrogen as an energy source is improving, particularly in Europe and China, as a result of public sector investment and policy focus. The EU in April included over €100mn in grant funding for the construction of hydrogen refuelling stations across seven EU countries, including Poland, in a larger package of €424mn for zero-emission mobility. The EU in May 2024 adopted its hydrogen and gas decarbonisation package, which introduced a regulatory framework for dedicated hydrogen infrastructure. According to the Hydrogen Council, in July 2024 alone, six European hydrogen projects reached final investment decision (FID) status. Investment in hydrogen projects reaching FID globally has increased sevenfold since 2020 from 102 committed projects to 434 in 2024. "We remain positive about the project pipeline and PGM demand. The open question is if the push will happen in the next year, or take longer," Sperzel said. By Maeve Flaherty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Congress passes waterways bill
US Congress passes waterways bill
Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Viewpoint: Europe’s EV future rests on Chinese FDI
Viewpoint: Europe’s EV future rests on Chinese FDI
London, 19 December (Argus) — The troubled buildout of Europe's EV supply chain, illustrated by the fall of Northvolt last month, suggests that the future now depends on foreign direct investment (FDI) — particularly from China. While EV sales in China rose by 46pc last month , they edged down by 2.48pc in Europe, and an increasing share is made up of Chinese-branded battery EVs , as western carmakers struggle to offer affordable models. China is now forecast to majority-own 300GWh of Europe's 1.3TWh battery capacity by 2030 ( see graph ). A shortage of skilled labour, fierce competition weighing on prices for feedstock materials and limited state investment — just some of the problems that befell Northvolt — suggest that Chinese FDI might need to increase further for Europe to expand its EV fleets. First, FDI into Europe that localises production of EVs that will eventually be sold to European consumers offers jobs to workers and affords Europe a portion of the value added. It offers a chance for technological ‘spillovers' — expertise on how to build and operate Chinese battery machinery in exchange for access to the largest EV market after China. Europe could also attract Chinese FDI under 50:50 joint ventures (JVs) between Chinese battery makers and domestic carmakers — such as CATL and Stellantis — in order to retain some equity and ensure an integration of local and foreign talent. It is how China developed its own internal combustion engine (Ice) industry, signing JVs with Volkswagen in 1984, Stellantis in 1992, General Motors in 1997 and Toyota in 2000, among others. It is also not clear to what extent China is comfortable with spillovers in exchange for market access. One criticism is that Chinese FDI might focus on EV assembly, although data from consultancy Rhodium Group show not only China's FDI into battery plants but that this has provided anchoring for FDI upstream into cathode and anode plants in Hungary, Sweden and Finland. Asian firms tend to hire talent from their home countries for senior positions without "skills trickling down to the local population", according to clean energy researcher Transport & Environment. Chinese firms could continue to make batteries in China, withholding the expertise that eluded Northvolt, before shipping parts for assembly in Europe. One condition could require a portion of FDI allocated to R&D, involving universities or local think-tanks. "R&D activities are usually not typical features of (Chinese) investments in the V4 [Visegrad] region, as investors usually bring only assembly," economist Agnes Szunomar said in a report on Chinese investments into the V4 in January, although Volvo and Nio have made plans in eastern Europe, Szunomar added. As it has increased, Chinese FDI — both state and private — has also shifted almost entirely away from mergers and acquisitions towards ‘greenfield' investments ( see graph ), i.e. businesses from scratch, suggesting a growing skills imbalance between the regions. European policy must change Europe is not the only target for Chinese EV-related FDI, and might have to increase its incentives if it is to build out homegrown industry. In a "carrot and stick" approach, endorsed by InoBat chairman Andy Palmer, the efficacy of the EU's much-deliberated tariffs as a ‘stick' appears uncertain so far. Analysis from Rhodium Group suggests that the EU's tariffs have disproportionately penalised western-branded EVs made in China and sold in Europe. They have also been too weak to entirely force China's EV production into Europe and yet strong enough to raise investor uncertainty, which could include further hikes on EVs or new tariffs on battery materials, for instance, which would scupper China's plans for FDI in battery assembly. Out of 11 EV plants that China is reported to have considered, just three in Europe have been confirmed ( see graph ) — the lowest share globally of China's investments. Meanwhile, tax breaks, grants and interest-free loans might fulfil the ‘carrot' in the EU's approach, as Hungary has illustrated, with state support for multiple projects, ranging from €2.4mn to €900mn for CATL's $7.3bn battery plant announced in August 2022 — set to create 9,000 jobs — and consequently 61pc of Chinese FDI into Europe last year, according to analysis from Rhodium Group ( see graph ). By Chris Welch Europe gigafactory forecast 2030 GWh Overall Chinese FDI into Europe, by conduit $bn Status of Chinese EV plants by region since 2022 Newly announced Chinese EV-related FDI by host region $bn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Q&A: Xcelsior aims to derisk minor metals investment
Q&A: Xcelsior aims to derisk minor metals investment
London, 19 December (Argus) — When UK-based Xcelsior Capital started exploring the investment landscape in the mining industry it noticed a significant interest in base metals but a lack of attention toward the lesser-known minor metals. These critical materials are often opaque and complex, leaving investors uncertain about where to start. Argus spoke with chief executive Liam Farley about Xcelsior's partnership with trading firm Wogen, the opportunities and risks associated with its investments, the influence of geopolitics, and Xcelsior's recent involvement in the Hillgrove antimony mine in Australia. What is Xcelsior Capital, and what is its investment model? Xcelsior is primarily a private credit investor that focuses on providing senior secured loans and working capital facilities and prepayments. As a financing partner of a physical commodity trader, Wogen Resources, we aim to establish a long-term sales and distribution agreement or offtake as part of our transactions. We work with mining companies entering production, expanding existing mine operations, or establishing new or existing processing and recycling facilities. We built Excelsior around Wogen's 50-year heritage of being integrated into more than 30 critical metals from upstream, concentrates, intermediate products and finished metals. As a result, we have a solid grasp of the risk-reward on the market side and strong relationships with end-users. This provides a great insight to derisk some of those market and value chain challenges and now allows us to focus on identifying opportunities and the operational risk as a key component. What are the main risks of investing in critical minerals? There is a lot of appetite for financing mineral projects in well-understood markets like gold, copper or iron ore. However, there is a lack of financing and understanding when it comes to critical commodities like antimony or tungsten. Minor metals have multiple end-uses, each with its different market dynamics. You must have a very deep understanding of the commodities themselves, the pricing mechanism, and the material specifications… these supply chains can be opaque. They can be very complex and fast-changing. Being able to navigate them is quite challenging for a lot of more generalist investors. It fundamentally creates a market risk component for critical metals, which can be a barrier. Additionally, many larger mining companies have traditionally avoid these markets because the assets are smaller and may not yield the expected revenue and profits compared with larger copper or iron ore mines. Which metals are on your radar? We are looking very closely at all the major commodities where Wogen has a prominent trading platform, including antimony, tungsten, vanadium, mineral sands, chrome and magnesium. We also are very interested in cobalt, but more on the recycling and processing side. In base metals, we are looking at tin. We focus on those commodities with energy transition links to new demand centres. New demand from sources like solar in small markets can significantly impact overall percentages and returns. For instance, electrification drives substantial demand growth for larger markets like copper, but its impact is smaller than that of markets like antimony. You recently signed an antimony deal with Larvotto Resources in Australia. Could you tell us more about it? We have signed a binding agreement with Larvotto Resources, whose subsidiary owns the brownfield antimony/gold Hillgrove project in New South Wales, Australia. We provided a $4mn loan in return for a seven-year production offtake agreement with Wogen, which will obtain the antimony concentrate from the mine and sell it globally through its customer base. Antimony prices have soared this year in part because of China's export restrictions. Do geopolitics play a significant role in investment decisions? There are large opportunities arising from the dislocation of value chains caused by geopolitics. We're now seeing this almost bifurcation in any material classified as dual-use in China like gallium, germanium and now antimony. This will result in increased volatility. The challenge is that you always want to underwrite projects based on long-term fundamentals, and we still do that. But we see the geopolitical shifts as an upside where we can capture that volatility in our investment strategy rather than rely on it as the sole basis for success. As global trade become more complex, do you see a need for more collaboration across different actors in the value chain? Private-public partnerships in critical metals are an absolute must for the success of western supply chains. One of our big focuses is to work with western groups, including government agencies, to facilitate the reshoring of critical metals and to figure out ways to incentivise new processing downstream. As a standalone investment, they can be challenging. They require very niche capital with great understanding. We are also looking for long-term partnerships with end-users and OEMs to form alliances and secure the supply of materials. There is a big opportunity in this area, but it takes a partnership approach, and that's something that everyone in our industry should prioritise in the next five to 10 years. By Cristina Belda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
