A Renewed Demand for Platinum Group Metals Amid Hybrid Growth

By Eric Onstad and Polina Devitt

Overview

LONDON (Reuters) – A surge in hybrid car sales, coupled with a slowdown in electric vehicle (EV) adoption, is projected to unexpectedly boost demand for platinum group metals (PGMs) in the coming years, akin to the prolonged lifespan now expected for coal.

Current PGM Market Situation

PGMs, mainly platinum and palladium, are facing a long-term demand decline due to their primary use in cleaning auto exhausts—a process unnecessary in pure EVs. A few years back, the outlook for PGMs and producers like Anglo Platinum, Impala Platinum, and Sibanye Stillwater was bleak as EV sales surged, leading to expectations of a dramatic drop in demand.

However, with the growth in EV sales tapering off and a notable increase in hybrid cars (which require catalytic converters to reduce emissions), PGMs have gained renewed importance, potentially stabilizing prices and prolonging the operation of some mines.

Market Insights

Marcus Garvey, head of commodities strategy at Macquarie Bank in Singapore, noted that while there is still an overall demand decline, the immediate collapse wasn’t as severe as previously projected. Data shows global sales of pure EVs grew only 11% year-on-year in the first half of 2024, whereas plug-in hybrid electric vehicle (PHEV) sales skyrocketed by 44%, according to consultancy Rho Motion. This is a stark contrast to the 77% growth in EV sales from two years prior.

Implications for PGMs

The rise in hybrid vehicles could extend the demand for PGMs until 2030 or beyond. This hybrid growth means that petrol and hybrid car sales, expected to be flat last year, increased by 9%, adding approximately 600,000 ounces to automotive PGM demand estimates, which rose 8% to 13.1 million ounces last year, the second-highest total ever.

Hybrid Vehicle Surge

The most significant increase in hybrid sales has been observed in China with a remarkable 70% surge in the first half of 2024. Consultancy Alix Partners has revised its forecast, anticipating that PHEVs will capture 12% of the global market by 2030, up from 5% two years ago.

Consumer Preference Shift

Surveys indicate that over 80% of prospective EV buyers in the U.S. and China are leaning towards PHEVs over pure EVs, likely raising PGM demand due to the higher amount of platinum needed in PHEVs, especially when operating cold engines.

Strategic Shifts by Automakers

Analysts predict the hybrid trend will continue until EVs become price-competitive with petrol vehicles, battery ranges extend, and charging infrastructure expands. Car manufacturers are increasingly focusing on hybrids, which offer better profit margins. Reports indicated major automakers like Toyota have drastically reduced their EV production plans for 2026.

Advantages of Hybrids

New U.S. auto emission regulations bolster the outlook for hybrids, allowing manufacturers to comply with EV mandates by producing more gas-electric hybrids. The U.S. and Canada saw a 33% rise in conventional hybrid sales in the first half of 2024.

Additionally, every additional million cars requiring catalysts could add around 150,000 ounces of PGM demand.

Impact on Battery Materials

The movement towards hybrids may reduce demand for essential battery materials such as cobalt and nickel, as hybrid batteries are considerably smaller than those in EVs. The average battery size for PHEVs was 23.3 kWh compared to 64.5 kWh for pure battery EVs in the first half of this year.

According to Sam Adham from consultancy CRU, the transition towards PHEVs and the scaling back of BEV targets is likely to adversely affect battery material demand growth in the coming years.