South Africa's platinum group metals sector has seen a strong rebound, with surging prices leading to higher profits, dividends, and taxes for the National Treasury. This revival follows a European Commission decision to ease restrictions on internal combustion engine vehicles. The development provides relief amid concerns over electric vehicle adoption.
The results season for South Africa's platinum group metals (PGM) producers has concluded positively, featuring increased prices, profits, dividends, and tax contributions compared to the previous year. South Africa holds about 70% of the world's known PGM reserves and supplies, benefiting from renewed demand that has driven up prices after years of depression.
Over the past 12 months, platinum prices have more than doubled to nearly $2,200 per ounce, while palladium has risen 75% to around $1,682, based on Johnson Matthey data. Although prices have moderated since peaks in late January, the fundamentals support a potential sustained rally. A key factor was the European Commission's December announcement effectively lifting the planned 2035 ban on internal combustion engine (ICE) vehicle sales, influenced by pressures from countries like Germany with significant auto industries. Instead, the EU targets substantial CO2 emission reductions from new cars.
PGMs have long been essential for autocatalysts in ICE engines, unlike electric vehicles (EVs) that do not require them. Impala Platinum CEO Nico Muller stated during a media call, “The continual downgrade in the penetration rates of EV vehicles – we believe there is a strong likelihood that will continue.” He added, “It is our view that the rate of electrification of vehicles is declining and will continue to decline.” Northam Platinum CEO Paul Dunne highlighted that this EU policy shift underpins sector optimism. The growing popularity of hybrid vehicles, which use more PGMs than pure ICE models, also contributes, alongside tightening supplies from past underinvestment and an improving global economy.
This rebound aids the South African Treasury in managing national debt at 78.9% of GDP. Mining taxes reached 40% of corporate income tax in 2022, driven by PGMs, according to Morgan Stanley analysts, with potential windfalls expected in 2026 and 2027 if prices hold. Impala Platinum paid R4 billion in taxes and royalties for the six months to December, up from R800 million the prior year. Northam paid nearly R1 billion in taxes, more than double the previous period, with royalties nearly tripling to R630 million. Sibanye-Stillwater reported R2.4 billion in taxes for fiscal year 2025, compared to R1.4 billion in 2024.
The rally, alongside gold's performance, supports the rand's exchange rate. However, escalating Middle East conflict risks inflating global prices and slowing growth, potentially reducing PGM demand. Muller noted, “We are an industry marked by long winters and short summers.”
