Chemical Industry Shows New Enthusiasm for Capacity Expansion, and Heavy Metal Catalyst Consumption Picks Up

By Li Lin

According to the recently released 2017 GFMS PLATINUM GROUP METALS SURVEY (hereinafter referred to as the “Survey”), after a sharp decline in 2015, demand for platinum in the chemical industry rebounded modestly in 2016 by 4% to 531 000 ounces (16.5 tons). After two consecutive years of decline, the chemical industry’s demand for palladium rebounded 10% to 401 000 ounces (12.5 tons) in 2016, due mainly to a pick-up in PTA production after a sharp drop during 2014-2015.

Growth of chemical industry demand takes the lead

Platinum: demand from nitric acid makers is the driving factor

According to the Survey, platinum consumption in the industrial sector increased by 4% to 1.73 million ounces (53.7 tons) in 2016. The growth of demand from the glass industry was the biggest, increasing by 68 000 ounces (2.1 tons); and demand for chemical platinum ranked second, up by 4%, largely due to the demand from nitric acid producers. However, platinum demand in the petrochemical and electronics industries dropped.
The demand for platinum from nitric acid enterprises became particularly strong in 2016, after a weak year in 2015 when the demand for fertilizer (the largest consumer of nitric acid) was low as a result of a global economic slowdown and continued decline in the prices of most agricultural products. Although the global economy grew slowly in 2016, the production of major agricultural products rebounded thanks to improved weather conditions and low inventory levels. However, compared with the period from 2011 to 2014, the net platinum demand from nitric acid enterprises was still low, as the chemical fertilizer industry was still coping with excess capacity.
In contrast, the platinum demand from PX makers in 2016 was stable. After a significant slowdown in 2015, global PX capacity continued to expand in 2016, but at a slower pace. Slower economic growth and smaller profit margins were the main reasons for the slowdown in global PX capacity expansion. In addition, the public was concerned about the environmental hazards and protested launches of some PX projects. Meanwhile, PX capacities in South Korea and Singapore steadily expanded, partially offsetting the decline in capacity growth in China.
Net demand for platinum from propane dehydrogenation (PDH) companies dropped 16% in 2016, but remained at a historical high. Global PDH capacity doubled during 2014 to 2016, and the growth in 2016 mainly occurred in the United States and China. Platinum consumption by addition silicone manufacturers in 2016 remained unchanged from 2015.
Several PX and PDH plants will be launched at the end of 2017, so demand for platinum in the chemical industry is expected to increase further. However, the overall demand will still be lower than the peak in 2015, due to weak demand from chemical fertilizer companies.

Palladium: excessive PTA capacity has been cut

Demand for palladium grew by 2% to 2.4 million ounces (63.6 tons) in 2016. The growth of chemical industry demand was largest, reaching 10%. The PTA industry’s excess capacity had been cut during 2014 and 2015, and its palladium consumption was rising, thus promoting the chemical industry’s overall palladium demand.
After two consecutive years of decline, the chemical industry’s demand for palladium rose greatly in 2016, up 10% to 401 thousand ounces (12.5 tons), due mainly to a pick-up of PTA output. Despite the recovery, the net demand from PTA companies was still low compared with the demand from 2010 to 2014. In addition, the demand for platinum and palladium in nitric acid enterprises was relatively low.
Palladium is gradually replacing nickel to avoid the problem of allergy. Also, OEM manufacturers have increased their use of palladium to improve the quality of brass plating and plastic plating, which is most obvious in the auto sector. However, due to the slow pace of capacity expansion, palladium demand among vinyl acetate monomer producers declined last year.
Thanks to the expansion of PTA capacity and the continued growth in the consumption of palladium for decoration, the total demand for industrial palladium is expected to rise further in 2017.

Platinum demand dropped by 16% in the petrochemical industry

In 2016, the demand for platinum from the petrochemical industry dropped by 16% to 129 thousand ounces (4 tons). Despite an increase in oil production, the production of catalytic reforming plants and isomeric chemical plants (consuming platinum-containing catalysts) declined slightly, resulting in a decreased platinum consumption. The demand for platinum in the oil industry is expected to pick up slightly in 2017, as some large refineries will start to use platinum-containing catalysts.

Different trends of demand from automobile exhaust catalysts

Platinum demand from the automobile exhaust purification catalyst industry rose by 2% to 3.34 million ounces (104 tons) in 2016, the third consecutive year of growth. Europe is the world’s largest diesel fueled vehicle market, and growth of platinum consumption in the European auto sector has pushed up global demand for platinum. Since 2016, all passenger vehicles sold in Europe must, for the first time, meet Europe VI emission standards throughout the whole year, so platinum metal consumption in making exhaust purifiers has increased. Meanwhile, the production of light-duty diesel vehicles went up by 3% YoY. Hence, platinum demand in the European auto sector grew by 6%. However, platinum demand in North America’s auto industry fell by 2%, largely due to a 14% reduction in output of heavy-duty diesel vehicles.
In 2016, palladium demand in the global auto industry increased by 6% to 7.97 million ounces (248 tons); the major driving force was a sharp rise in China’s vehicle production. Demand for palladium among Chinese auto companies increased by 278 thousand ounces (8.7 tons), a growth of 16%. Also, palladium demand from European and North American auto companies increased by 5% as palladium consumption and vehicle production both went up. Palladium demand in the Japanese auto industry fell by 3% due to a 2% drop in the output of light-duty gasoline vehicles.
Demand for palladium in 2017 is estimated to increase by 3% as global light-duty gasoline vehicle production is anticipated to grow by 2%, among which, China’s production will be up by 1%. But the outlook for platinum demand is not favorable, likely to decline by 2%. The main reason is that the diesel vehicle market share will continue to shrink in Europe; it dropped by 4% YoY in January 2017 to 47.3%. The output of light-duty diesel vehicles in Europe is expected to fall by 2% YoY.
The oversupply of physical platinum will expand to 315 thousand ounces (9.8 tons) this year, and by the end of 2017, the global platinum inventory will rise to 9.1 million ounces (283 tons), equivalent to 14 months’ demand. The demand for platinum is expected to increase by 3%, thanks to the growth of the chemical and oil industries. As PTA capacity expansion accelerates and the demand for palladium for decorative use is also growing, palladium demand from the chemical industry has been rising this year. In 2017, the physical palladium market is expected to suffer from a shortage for the sixth consecutive year, this time falling short by 1.38 million ounces (42.9 tons). By the end of 2017, the palladium inventory would be reduced to 13.94 million ounces (434 tons), equivalent to 16 months’ demand.