Introduction:
The Platinum Group Metals (PGMs) are among the most valued elements in the globe and attract high process within the global market. They not only serve investments opportunities for companies, but also find use in large-scale production of high-tech industrial commodities. These commodities especially find use in automotive and electronics manufacturers. In the automotive industry, PGMs find continued use in creating catalysts that lower carbon dioxide emissions, with the aim of producing and developing environmentally friendly cars. In the electronics sector, the PGMs are used in producing hard disks and motherboards in a sector that has traditionally been termed as a high-tech ‘clean’ industry (MISTRA, 2014).
The demand for platinum has rapidly expanded within the past decade, as the demand for jewelry, growth in the automobile (increased demand in automobiles), and electronics industry continuously grows. Besides the demand and the rarity of these metals, factors such as political stability, environmental concerns and economics function as limiting factors in shaping the global platinum industry (Darst, 2013). This is mainly because such factors directly affect the mining, refining, marketing, transport, and sales of platinum. A keen exploration into the supply chain of the PMGs, and in specific the mining sector, depicts major drawbacks and inequalities, revealing that the story is not as positive as it may superficially seem.
The High PMGs demand and lack of substitutes escalates the prevalent inequalities and vulnerabilities within the specialty metals industry. Furthermore, their production threatens the integrity of the production, distribution, and consumption chain.
Production issues:
The two chief global producers of PMGs are South Africa and Russia. According to global statistics on platinum, the former (South Africa) provides approximately 72 percent of the global deposits, while the latter (Russia) has up to 14 percent of the world platinum reserves. Across the two countries, both encounter critical production and sustainability issues. High pollution levels describe the Russian town of Norilsk, while the distribution of profits and remunerations schemes in South Africa are poorly defined (Parker, 2007). Mining occurs in dangerous environments, often without proper safety measures or training to the workers. This leads to numerous health and occupational risks facing the miners. Furthermore, in South Africa communities are often evacuated from areas where the precious metal is abundant to pave way for mining with little or no compensations. Constant strikes from the mineworkers and series of litigations from local communities’ lawyers, representatives, and activists interfere with the mining operations. These provide a direct impact on the supply and prices of the PMGs in the global market (Burgis, 2015).
The mining of PMGs in South Africa and across other regions in the world requires vast resources of water and power, and has immense effects on environmental degradation and pollution. Studies in South Africa reveals that PMG mining effects ground water hugely; it interferes with flow and releases large volumes of toxic metals into these water reserves. Air pollution is another occurrence that leads to severe respiratory diseases, with about 2 million tons of sulfur dioxide emitted into the air annually (Wilburn & Geological Survey, 2012). On the grounds that these healthy risks, loss of livelihoods, ecological and environmental damages are irreversible, the mining costs are prohibitive and unquantifiable due to their far-reaching implications. Economists argue that under such circumstances, the social and environmental damages overshadow the cumulative benefits accrued from the mining activities, and no realistic market prices would offset such vast losses (Burgis, 2015). Such a premise therefore offers an economic justification as to why the platinum prices are constantly skyrocketing.
Fabrication and refining issues:
Once the metals are extracted, platinum is refined and traded for various purposes: industrial and for investment purchases. Most of the purchases are undertaken by the United States, United Kingdom, Switzerland, Japan and Belgium. Most of the information about the supply contracts, the volumes exported, the contracting phases and other specifics remain confidential and sensitive. Further to this, the volumes of platinum sourced from spot markets exacerbate the technical hitches of tracing back metals to specific regions or mines, because these supplies have high probability of being co-blended with PMGs from other regions (Burgis, 2015).
In nearly all the transactions, defining the customers and the suppliers is quite difficult. With lack of clear supply chains, the social responsibility of selecting suppliers and customers is hugely abused, with high chances of unethical practices. Taxes and labor standards are regularly neglected, where the immediate and prominent transacting parties (subcontractors, company representatives and suppliers) exploit their interests optimally, creating large benefits for themselves at the expense of the lower parties, such as the communities and the miners (Burgis, 2015; Parker, 2007). Mitigating these risks has always been complex, as the stakeholders’ attempt to introduce transparency in the PGMs supply chain, by creating a better understanding on where the minerals go after their extraction is often fruitless.
End use issues:
Most of the PMGs demand end up in automotive industry, while the raw materials are used in jewelry, petro and chemical processing, electronics, medical and dental applications. The figures of end use across various countries is difficult to interpret, from the fact that knowledge gaps exist in all importations. For instance, estimates show that China receives about 7 percent of the global PMGs supply, however, demands from dental, electronics and chemical uses show a significantly higher amount of up to 30 percent PMGs demand (Burgis, 2015).
The reason behind these cover-ups is that most of these industrial uses of PMGs pose serious environmental threats, which ought to be banned. For example, only platinum can be used in making automotive fuel cells, where the metal is used as a catalyst to generate power through an electrochemical reaction. The production of hydrogen and hydrocarbons is an expensive and environmentally unfriendly procedure (Darst, 2013). Very limited data is available on the quantities of PGMs traded in the precious metals, as well as the accruing financial revenue, which compounds any logical interpretations and market investment analysis.
Conclusion:
In conclusion, the discussion above provides a concise analysis on the dynamics that shape the PMGs industry. The main emphasis of the discussion is on the supply chain, and the interplay between the factors affecting the prices and consumption of this special metal. From the discussion, it is evident that as the global demand for platinum intensifies, the social and environmental spheres will perpetually suffer severe damages, while the world market prices continue to rise. Also, as political instability and industrial strife and stoppages reduce the supply of platinum to its lowest levels, this will continue to deter investment decisions in South Africa, and may bring the mining industry into a breakdown (Wilbur & Geological Survey, 2012). Therefore, increasing the exploration of alternative substitutes for the platinum elements, prevails imperative to the diversification and restructuring of the supply chain.
References:
Burgis, T. (2015). The looting machine: Warlords, tycoons, smugglers, and the systematic theft of Africa's wealth. London William Collins.
Darst, D. M. (2013). Portfolio investment opportunities in precious metals. Hoboken: Wiley.
MISTRA. (2014). South Africa and the Global Hydrogen Economy: The Strategic Role of Platinum Group Metals. Real African Publishers.
Parker, P. M. (2007). World market for platinum and other platinum group metals, the: a 2007 global trade perspective. ICON Group.
Wilburn, D. R., & Geological Survey (U.S.). (2012). Global exploration and production capacity for platinum-group metals from 1995 through 2015. Reston, Virginia: U.S. Department of the Interior, U.S. Geological Survey.
