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Will The Fuel Cells Vehicles Save Platinum And Palladium?



Although everyone agrees that the electric revolution is looming, there is no consensus about the pace and the detailed form of the upcoming shifts in the automotive industry. In particular, some miners and analysts believe that fuel cell cars will spur or at least support the demand for platinum and palladium. For example, the world’s three largest platinum producers (Anglo American Platinum (OTCPK:AGPPF), Impala Platinum (OTC:IMPUF), and Lonmin (OTC:LNMIF)) invested in projects related to fuel cell technologies. Indeed, the white metal is used in catalysts in fuel cells vehicles, where power comes from combining hydrogen and oxygen over a platinum catalyst. The game is definitely worth the candle: today’s fuel cell cars need a full ounce of platinum versus a 2-4 grams PGM loading for the average gasoline or diesel vehicle.

But the rescue will not come from this side. First of all, hydrogen technology is inferior to battery electric vehicles. The key point is that hydrogen is actually not an energy source but merely a carrier. Hence, you have to get hydrogen from natural gas or water in very energy intensive process, and then you have to compress it into liquid and transport it to the final destination. Finally, the consumers must pump the liquid hydrogen into their car, where a fuel cell converts it into electricity to drive other electric vehicles. So, why should anybody bother storing energy in hydrogen instead of charging a battery pack directly? Indeed, electric cars are at least three times more energy efficient than hydrogen fuel cell vehicles.

Moreover, the latter technology needs much more expensive infrastructure (think about all these large factories/refineries, pipelines, trucks, storage facilities, compressors, hydrogen gas stations, and so on), while the former relies on already existing power grid. There are, thus, much more charging stations than hydrogen fueling stations. Lack of infrastructure is perhaps the biggest barrier for fuel cell vehicles.

And, hydrogen is not actually clean technology, at least not in the U.S. when it is mainly produced from natural gas. It’s a fossil fuel but in a green disguise. Finally, electric cars are cheaper than hydrogen vehicles – actually, in some countries, the total costs of ownership of an electric car are on parity with conventional cars (due to a per-mile fueling cost below that of gasoline). It cannot be said the same about the fuel cells vehicles, and steadily declining battery prices will even increase the advantage of electric cars even further. The comparison of these two technologies is presented in the table below:

Table 1: Electric vs. fuel cells vehicles

Actually, the high price of platinum is one of the major challenges that the fuel cell cars face. It’s not surprising, given that platinum represents about 50 percent of the cost of a fuel cell stack. Hence, researchers continuously try to reduce the need for the white metal. Do not count on palladium in this matter, as it is only slightly cheaper than platinum. Instead, scientists at the U.S. Department of Energy’s Argonne National Laboratory have recently developed a new non-precious metals fuel cell catalyst. Meanwhile, Toyota announced the availability of a new, smaller catalyst that uses 20 percent less precious metal while maintaining the same exhaust gas purification performance. Another example is the study of Chalmers University of Technology and Technical University of Denmark, which discovered a new method of creating a nanoalloy which could reduce the amount of platinum required for a fuel cell by about 70 percent. Hence, even if the fuel cell technology succeeds and wins the battle with electric cars, which is highly unlikely, it would achieve it only through reducing the need for platinum.

Moreover, the use of platinum-heavy fuel cell technology in the electric car market is growing much too slowly to offset falling autocatalyst demand. While the hybrid and electric cars made up about 1.1 per cent of global automotive sales, the market share of fuel cell vehicles amounted to just about 0.015 percent. The truth is that the latter technology lags behind electric cars. It would take several years to refine it and build the whole infrastructure necessary for fuel cell cars, while electric vehicles are already on hyper-drive.

Hence, the demand for platinum from hydrogen cars could replace only about 10-20 percent of demand from the car industry at best, while more than 40 percent of platinum demand comes from gasoline and diesel catalysts. However, it does not matter, since even if hydrogen electric technology preserves some automotive demand for platinum, which is not certain, the share of the overall automotive demand will shrink significantly. Investors should be concerned primarily about the replacement of platinum group metals by battery electric technologies – since, as Chris Griffith, the Anglo American Platinum chief executive, said, “if fuel cells are not adopted, we may have no auto market for platinum by 2050.”

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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WTI Oil Surges to Highest Since July 2015 Ahead of U.S. Supply Data By



© Reuters. WTI oil prices surge to best level since July 2015 – Oil prices rose further on Wednesday, with the U.S. benchmark surging to its best level since July 2015 amid speculation weekly supply data due later in the day will show a large drop in U.S. crude inventories.

The U.S. Energy Information Administration will release its official for the week ended Nov. 17 at 10:30AM ET (1530GMT).

After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories fell by last week. That compared with analysts’ expectations for a decline of around 2.1 million barrels.

The API report also showed a gain of 869,000 barrels in gasoline stocks, while distillate stocks fell by 1.7 million barrels.

There are often sharp divergences between the API estimates and the official figures from EIA.

U.S. West Texas Intermediate (WTI) jumped $1.08, or about 1.9%, to $57.88 a barrel by 3:20AM ET (0820GMT). It touched its highest level since July 2015 at $57.98 earlier in the session. Trading was thinning out ahead of Thursday’s Thanksgiving holiday in the U.S., according to market participants.

Meanwhile, futures, the benchmark for oil prices outside the U.S., rose 64 cents, or around 1.1%, to $63.21 a barrel.

Oil prices amid expectations that oil producing countries will agree to extend an output cut at their meeting at the end of this month.

The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and prop up prices.

The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.

In other energy trading, inched up 1.4 cents, or 0.8%, to $1.776 a gallon, while gained 1.3 cents to $1.949 a gallon.

dropped 1.1 cents, or 0.4%, to $3.006 per million British thermal units, as traders looked ahead to due later in the global day. It comes out one day ahead of its normal release time due to the Thanksgiving holiday.

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One Country, Two Systems Roils China’s Mills as Curbs Bite By Bloomberg



(Bloomberg) — One country, two systems has come to the world’s largest steel industry. As China’s great environmental cleanup takes effect during the winter months, the stringent curbs being implemented across the north are hurting mills’ output, while giving free rein to producers in the south.

“Southern steel mills unaffected by the output restrictions are generally running at full speed,” brokerage Nanhua Futures Co. said in a note. “They’re seeing better demand for their products as order volumes spike. Inventories are rapidly shrinking.”

Mills, miners and investors have been tracking China’s bid to rein in pollution this winter by imposing restrictions on steel supply, in addition to curbs on other industrial activity such as construction. The policy makers’ efforts are targeted at mills in the colder north, zeroing in on the so-called 2+26 cities, which refers to Beijing and Tianjin plus other centers. As well as skewing production, the drive is impacting raw materials, especially iron ore.

“You could say it is one country, two systems,” said Hong Hao, chief China strategist at Bocom International Holdings Co. in Hong Kong, using the phrase applied to China after the former British colony of Hong Kong was returned to mainland rule in 1997, yet was allowed to retain its autonomy.

Largest Buyers

There’s been stronger demand for iron ore “from the southern Chinese steel mills, offset by weaker demand from the northern mills due to environmental restrictions,” RBC Capital Markets said in a Nov. 15 report. The country’s mills are the largest buyers of seaborne ore, taking cargoes from miners including Brazil’s Vale SA and Australia’s BHP Billiton (LON:) Ltd. and Rio Tinto (LON:) Group.

The green push in China comes toward the end of a year when steel prices have rallied, with gains sustained by better-than-expected demand as well as efforts by the government to tackle overcapacity. Spot reinforcement bar rose to 4,391 yuan ($662) a ton on Tuesday, near the high of 4,396 yuan on Sept. 4, which was the most since 2011. That’s sent profits soaring at Baoshan Iron & Steel Co. and Hesteel Co., the listed units of the country’s top mills.

Wood Mackenzie Ltd. charted the policy’s uneven impact. The curbs will probably cut so-called hot-metal supplies by about 34 million tons this winter, with a reduction of 14.2 million tons this quarter and 20.2 million tons in the first three months of 2018. Still, “the loss will be partly offset by production hikes from capacity outside the 2+26 region,” it said in a note this month. The net decline this quarter may be just 4 million tons, it said.

Nationwide production has started to slow, official figures show. In August, China mills churned out a record 74.6 million tons. The next month it dropped to 71.8 million, and the total was little changed in October at 72.4 million.

‘Already Declining’

“Output in the north is already declining, demand for iron ore will be affected,” said Bocom’s Hong, who estimated steel production may drop by 30 million to 50 million tons. “The south tends not to have restrictions normally due to weather conditions and less concentration of production.”

In a sign of that trend, inventories of iron ore at ports in northern China climbed to a record 100.1 million tons this month, according to Shanghai Steelhome E-Commerce Co. At the same time, stockpiles in the south are near a one-year low after bottoming at 8.6 million tons in October.

The industry and investors are also tracking nationwide holdings of steel, including rebar, a basic product used in construction. These have shrunk for five of the past six weeks to 3.61 million tons, the lowest level since November 2016, according to Steelhome figures. Steel inventories won’t rise meaningfully until the end of winter cuts in March, buoying prices in the meantime, Goldman Sachs Group Inc (NYSE:). said in a report received Wednesday.

“This year, especially in the northern part, there are strict controls,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd., noting steel demand and prices have been strong, while supply’s limited. “Producers who don’t face restrictions, they’ll definitely want to produce more.”

(Updates with comments from Goldman in penultimate paragraph.)

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