Amplats outgoing CEO expects internal combustion engine to be ‘stronger for longer’

It’s been a tough year for PGM producers, and Amplats interim financial results, unveiled on Monday, reflected that. 

“Ebitda was 69% lower year on year at R13.4-billion, mainly due to the impact of significantly lower prices, lower sales volumes and higher costs,” the company said in a statement. 

Headline earnings fell more than 70% to R7.9-billion. 

Of course, everything is relative, and Viljoen – who is stepping down soon as Amplats CEO to take up a new job at US gold producer Newmont – was not so long ago presenting record results for 2021 on the back of record prices. 

But the heady PGM prices of 2021 have since come crashing down to Earth. 

“The PGM average realised basket price was $1,885 per ounce, 29% lower than in the same period of 2022. This weak performance was due to sizeable declines seen in rhodium and palladium, taking both to multiyear lows,” Amplats said. 

But the company said it sees a rebound, which one might, of course, expect from a PGM producer.

Growth in sales of electric vehicles (EVs), for example, is seen slowing and the sector has been hitting some snags with rising inventories of unsold vehicles in key markets such as the US. 

Read more here: US EV market struggles with price cuts and rising inventories | Reuters

By contrast, the bread-and-butter for the PGM industry remains petrol and diesel engines, which require the metals as autocatalysts. 

“If you look at the numbers, we see light duty vehicle production increasing, and what we are starting to see is electric vehicles starting to bump into constraints … that’s why we feel ICE [internal combustion engine] vehicle production will continue to grow,” Viljoen told Daily Maverick in an interview. 

“I believe we will continue to see support for our product. The data is there – this is not us talking our book. The data is there in terms of production … The data is there in terms of EV penetration. 

“If you look at the developing world and the cost of decarbonisation, I think there is a real world where we are going to see ICE stronger for longer. And I think we are heading into a mixed transition … we have to start thinking about other carbon reduction areas like consumption, sequestration and carbon capture,” she said. 

US motor sales – the vast majority of which are powered by ICE – saw robust growth in the first half of this year.

Read more here: Strong demand drives US new vehicle sales higher in the first half of the year | AP News

There is a reason the US Fed has been raising interest rates aggressively. Demand pressures in America are simply red hot. 

When or if this translates into higher PGM prices remains to be seen. But South Africa is by far the largest producer of PGMs, so a spike in prices will be welcomed by more than just the producers and their shareholders and employees. 

PGMs are a crucial export and source of hard currency for South Africa’s economy, lending support to the balance on the country’s current account and the value of the rand. 

The internal combustion engine remains critical to the South African economy, and not just on the domestic front. DM