IN last week’s article I looked at the production statistics and capacity of platinum mines in Zimbabwe, the export trends of precious minerals in Zimbabwe and the ownership structure of Platinum Group Metals (PGMs) value chain and feasibility of the tangibly benefitting from value addition of its precious minerals.
This week I look at ways of making PGMs more beneficial to the new Zimbabwe that needs all the ideas and robust policy thrust and implementation it can get for the economy to be back on its feet and provide the much needed employment and revenue for the Government.
Comparative production capacity of PGMs in Zimbabwe and the globe
The current ore extraction capacity from the three mining operations (Zimplats, Mimosa and Unki mines) is over 8Mt of ore. Of the produced PGMs, about 52 percent is platinum, 38 percent palladium, six percent gold and four percent rhodium.
The end product (matte and concentrate) are sent to South Africa, Anglo Platinum and Aquarius Platinum for refining. About 7 500tonnes and 6 000tonnes of nickel and copper respectively are also produced as by-products of PGM refining.
The companies projected production period extending to between 2038 and 2055 depending on reserves and resources and the estimated extraction rates. Capacity utilisation in 2013 for the sector was more than 77 percent.
The production of PGMs takes place in a few countries since the reserves are found in a few countries that include South Africa, Russia and Zimbabwe, among a few others. South Africa has 88 percent of known world reserves of PGMs followed by Zimbabwe and then Russia. Worldwide, there are fewer than 10 PGM mining companies.
Russia is the world’s largest source of palladium through Norilsk. Norilsk was also reported to be a significant producer of platinum (13 percent) and rhodium (11 percent), yielding 28 percent of the world’s PGM supply.
These comparative figures show that Zimbabwe’s production of platinum is very small compared to South African production. However, Russian production of platinum, though greater than Zimbabwe’s is comparable.
Zimbabwe’s palladium is significantly lower than South Africa and Russia’s production.
This is despite the fact that Zimbabwe’s PGM reserves are reported to be larger than Russia’s. Therefore Zimbabwe has the potential to overtake Russia in production through expansion of mining operations as well as increasing processing capacity.
End products of PGMs and their destination markets
The end products of the Zimbabwean processes are PGM concentrates and converter matte. It must be noted that the transportation costs are quite significant as they could be six times more costly due to the bulkier concentrates as compared to the refined metals. Globally, the final product will include platinum group metals (platinum, rhodium, ruthenium, osmium and palladium), precious metals (gold, silver) and base metals (copper, nickel, cobalt). Applications for the PGMs include chemical processing, catalytic processes and engineering to transport equipment, automotive, electronics, packaging, and construction and to jewellery, aerospace, lasers, lighting, medical equipment, fibre optics transmission, military radar and missile guidance, solar energy and many more.
Most of these downstream applications of PGMs are located outside the country. The end products can be classified as refined metals, fabricated products and jewellery. One PGM fabricator, Johnson Matthey, based in UK and having divisions all over the world manufactures glass industry products, laboratory apparatus, crucibles, wire, tube and sheet products, catalyst gauze, jewellery alloys and brazing alloys. It also fabricates PGM salts and precursors, emission control catalysts, process/petroleum catalysts, passive component materials, fuel cell components, gas purification and plating salts. The fabricating plants are distributed in Siberia, South Korea, South Africa, Japan, UK, USA and Canada. The main fabricated products find application in catalytic convertors for automobiles, fuel cells and electronics.
Opportunities for Zimbabwe through global PGM demand
Auto catalyst Sector
ZEPARU in a 2014 report entitled Engineering and metals industry value chain analysis notes that the auto-catalyst sector is the most important end-user of PGMs. Increasingly stringent environmental legislation and the spread of regulation into more engine sectors globally have created a huge ongoing market for platinum, palladium and rhodium.
Platinum competes with palladium for use in gasoline-powered vehicles, while only platinum is suitable for diesel engine systems. Platinum alone has the properties to deliver the required performance under the lean-burn, low exhaust temperatures of the diesel engine exhaust. Sales of platinum-based diesel engine catalysts are steadily increasing as lower running costs make diesel vehicles a more popular car choice.
Looking ahead, tightening exhaust emission regulations worldwide for both light and heavy diesel engines will mean increased use of platinum-rich catalysts. Market penetration of diesel light vehicles in some parts of the world, notably North America, has been very low compared to that in Europe, but is expected to rise as fuel economy becomes a more important factor in car purchasing.
Indeed, Europe saw a 17 percent increase in auto-catalyst demand for platinum, reflecting the steep growth in diesel car sales, which is estimated to have made up just over 50 percent of the European car market for 2005. However, this pattern is not reflected elsewhere in the world. Japanese demand was down three percent in 2005, but this is due to considerable restocking in 2004 inflating the previous year’s data.
Vehicle production in Japan still increased, owing mainly to new emission legislation affecting the heavy-duty vehicle sector. In North America, platinum demand was up 2.5 percent. Growth was restricted owing to the substitution of platinum by palladium in gasoline auto-catalysts and poor sales from major domestic automobile manufacturers, but was offset by increasing sales of Japanese vehicles, where the diesel market remains very small.
Chinese vehicle production was up 15 percent, along with increases in India, South Korea and Thailand. These output rises, coupled with the parallel tightening of emission standards, contributed to a growth in demand for platinum, up 13 percent in the rest of the world.
Global demand for platinum jewellery, accounting for 26 percent of total platinum utilisation, is estimated to have declined in 2005, largely attributable to the sustained high platinum price. European consumption has been steady and this is forecast to continue, while demand in China, Japan and the USA has become more price elastic, resulting in lower sales. Chinese platinum usage (accounting for around 45 percent of world demand) has been particularly affected by the substitution of white gold and palladium, falling 13 percent since 2004.
Platinum is used in the magnetic layers of all hard disks and, to achieve higher data densities and faster access times, the levels used in the cobalt-based magnetic alloy continue to increase. With the proliferation of hard disk devices, such as recordable DVD players and personal digital music players, in addition to the more slowly growing established computer market, platinum usage rose by 20 percent in 2005 and this trend will increase in the foreseeable future.
Glass and Glass Fibre Manufacture
Demand for platinum in 2005 rose by 22 percent driven by the consumer products market. In Japan, Taiwan, South Korea and Singapore over 20 new production lines were constructed for the manufacture of high-quality glass to meet the demand for flat-panel displays.
These lines use platinum and rhodium to make stirrers and crucibles for molten glass handling. In 2004, new glass fibre production capacity in China also helped to boost the glass sector’s requirement for platinum.
Petroleum Refining Industry
Consumption of platinum in the petroleum industry has rose three in 2005. Strong global demand and tight supply have meant that petroleum refineries have been operating at or very close to capacity, so catalyst beds have been topped up more frequently.
The future prospects for platinum in petroleum refining were reported to be stable, with the sector demand steadying at around 170 koz per year. Attempts at reducing the platinum (and ruthenium) content of the bi-metallic catalysts used in reforming petroleum have shown that a loss in catalyst performance can occur.
Limitations on PGM reduction in this sector have meant that PGM use is assured in the medium term. With no reason to believe that continued use of bi-metallic catalysts will be called into question, platinum’s role in this area will be ongoing, without showing extraordinary growth and trailing the fortunes of the petroleum refining industry having realised the huge market for PGMs globally and also admitting that Zimbabwe has the potential to benefit meaningfully from its abundant mineral resource endowment but because of huge set up costs for refinery and smelter establishment in the country, one believes the setting up of a Sovereign Wealth Fund (SWF) as enunciated in Zim-Asset is the way to go for the country’s economic revival and economic growth sustainability and in this regard, one will begin to look at the mechanisms for the setting up of a SWF in Zimbabwe from next week onwards.
-Butler Tambo is a Policy Analyst who works for the Centre for Public Engagement and can be contacted on firstname.lastname@example.org