The platinum group metals market Asia’s impact, now and in the future Singapore, 2016

Beresford Clarke SFA (Oxford) Ltd.

© SF

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A (Oxford) Ltd, October 2016 © SFA (Oxford) Ltd, October 2016

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PGMs and Singapore Lots of activity & a major hub for trade

Vault

LBMA Conf. Financial trading hub

© SFA (Oxford) Ltd, October 2016

Factory/ plant using PGM

Source: SFA (Oxford)

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Today’s agenda Asia’s impact on the PGM markets, now and in the future •A s Asia’s PGM market, the five lions: 1. PGMs are a discretionary income story, new cars top the list

2. Asia’s populations are getting richer and consume more PGMs 3. Asia’s automotive demand is a palladium story

4. Excessive palladium stock has kept China well supplied to date

© SFA (Oxford) Ltd, October 2016

5. Asia’s influence on the market ahead

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1. PGM (discretionary) demand Autos, jewellery, gadgets New cars

Global PGM demand 1%

3% 4%

1% 6%

Autocatalyst

6%

Jewellery

Bling

Chemical 16%

63%

Electrical Petroleum Glass Dental

Gadgets

Other

© SFA (Oxford) Ltd, October 2016

Source: SFA (Oxford)

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2. Disposable income & PGMs: new money = new cars China's GDP per capita Current US$, thousands 10 GDP per capita is more than 8 times 8 higher than in 2000 6

3E PGM moz

India

2.5

1.8

2.0

1.5

1.5

0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00

GDP per capita has more than tripled since 2000

1.2 0.9

1.0

4 2 0 1960

Autocatalyst PGM demand (rhs) 1970

1980

1990

2000

0.5

0.3

0.0

0.0 1960

2010

© SFA (Oxford) Ltd, October 2016

1970

1980

1990

2000

2010

SE Asia

Japan 50 45 GDP per capita 40 has declined by 35 13% since 2000 30 25 20 15 10 5 0 1960 1970 1980 1990

0.6

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2000

2010

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1960

0.4 GDP per capita has more than tripled since 2000

0.3 0.2 0.1 0.0

1970

1980

1990

2000

2010

Source: SFA (Oxford), World Bank

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Potentially >100 plant projects requiring PGMs in Asia

© SFA (Oxford) Ltd, October 2016

Source: SFA (Oxford)

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3. Asia’s PGM demand It’s a palladium growth story (gasoline autocatalysts) Asia palladium demand

Asia platinum demand

moz 4.0

moz 4.0

3.5 3.0

Autocatalyst Industrial

3.5

Jewellery 3.0

2.5

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0 2007

2010

© SFA (Oxford) Ltd, October 2016

2013

2016

0.0 2007

2010

2013

2016

Source: SFA (Oxford)

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Asia’s autocatalyst PGM demand in context Now leading consumers of palladium globally Automotive PGM demand moz 5.0 4.5 4.0 3.5 3.0 2.5

Pt

2.0

Pd

1.5 1.0 0.5 0.0 2007

2016

Asia

© SFA (Oxford) Ltd, October 2016

2007

2016

W. Europe

2007

2016

N. America

Source: SFA (Oxford), LMC Automotive

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Autocatalyst demand potential in Asia Immature with huge scope for growth Personal vehicle density

Personal vehicle density

Per '000 driving population

Per '000 driving population 600

1,200

Malaysia USA

1,000

500 Korea

800

Western Europe

600 400

Japan

AsiaPacific

200 0 2000 2005 2010 2015 2020 2025 2030 2035

© SFA (Oxford) Ltd, October 2016

400

China 300 200

Thailand Indonesia

100 0 2000

India

2010

2020

2030

2040

Source: SFA (Oxford), LMC Automotive

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4. Palladium stock in China End of the disconnect between imports and demand? Total demand vs. imports to China (& HK) Palladium, koz 2.4 2.2 2.0 Narrowing 1.8 1.6

Depleting local stocks (imports flat and low)

Higher imports required

1.4 1.2 Demand (net of local supply) 1.0 2009

© SFA (Oxford) Ltd, October 2016

2010

2011

2012

2013

Imports 2014

2015

2016

Source: SFA (Oxford), GTIS

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Palladium demand, balances and price volatility Price volatility set to rise as (China’s) stocks deplete? Asia autocatalyst palladium demand

Pd supply-demand balance

50 days price volatility

moz 3.5

moz

80%

0.5

30

3.3

70%

25 60%

3.1 0.0

2.9

20 50%

2.7 2.5

-0.5

15

2.3

30% 10

2.1

20%

-1.0

1.9

Balance

1.7 1.5 2008

40%

5 10%

Stocks (rhs) -1.5 2010

2012

© SFA (Oxford) Ltd, October 2016

2014

2016

0 2008

2010

2012

2014

2016

0% 2008

Pd price volatility 2010

2012

2014

Source: SFA (Oxford), Note: Market balance excludes Russian stock sales and investment

2016

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5. Conclusions Asia is a palladium auto story • Asia is the largest PGM consuming continent • Growth in PGM demand in Asia has mostly been about cars and palladium • There is still huge upside potential as the automotive market is immature • A disconnect exists between palladium imports and growing end-use • Stock that built up in the mid-2000s might be starting to come to an end? • Strong Asian demand is likely to lead to higher palladium prices… • …but also end in extreme price volatility

© SFA (Oxford) Ltd, October 2016

Source: SFA (Oxford)

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Thank-you

SFA (Oxford) Ltd, Oxford, UK Tel: +44 1865 784366 Mobile: +44 7766313928 Email: [email protected] Web: www.sfa-oxford.com © SFA (Oxford) Ltd, October 2016

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