PGMs - scenario analysis

SFA (Oxford) can establish a base case of PGM fundamentals by bringing together detailed extrapolations of long-term supply and demand. This enables us to consider the impact of projected changes in the platinum market equilibrium for the purposes of estimating optimistic and pessimistic scenarios out to 2020 and beyond.

A sensitivity analysis of PGM prices, exchange rates and upcoming royalty legislation is conducted to derive credible economic extrapolations of global primary supply (plus by-product supply from nickel producers in Canada and Russia). In addition, optimistic (including possible and probable projects) and pessimistic (excluding marginal mine and unviable new projects) production scenarios are extrapolated to ascertain the long-term price dynamics of platinum and the consequent impact on palladium and rhodium prices.

For demand and macroeconomic extrapolations, our scenario analyses also include base case, optimistic and pessimistic scenarios. The optimistic scenario presents stronger economic growth than in the central case, with China sustaining near double-digit growth rates and India flourishing, while the Japanese and European economies overcome their structural constraints. The pessimistic scenario envisages a major shock to the world economy from sustained high oil prices and the unwinding of current global financial imbalances.