2016: The Big Turnaround For Tech Metal Prices? Part 1: Precious Metals

2015 was not a good year for technology metals. Markets around the world saw prices for precious metals, rare earth elements and strategic metals deteriorate to the point where costs exceeded price, and mines began to falter. 

As the year comes to a close, we look at industrial aspects driving prices to determine where the trends are headed for 2016. The first part of this analysis looks at precious metals.

Gold and Silver

Gold received a lot of attention in 2015 with new developments in many areas being presented. Among them nuclear fusionsustainable energy production, catalysis and a variety of new applications in jewelry, pharma and electronics made possible an an important component in nano-technology. Other hopefuls like the golden Apple Watch, however, failed to impress the market, and wearables in general had troublegetting off the ground. In total, industrial uses of gold were too small to impact the physical market which is largely driven by investment and jewelry products, and there are no indications for this to change in 2016.

Silver continues to be on a strong path to recovery as an important industrial metal after the collapse of analog photography. Slowly but steady, the use of solar power increases in many areas of our lives, including promising developments with solar roads. There were setbacks, too, with the “Solar Impulse 2” seeing its attempted solar-only around the world flight rudely interrupted in Hawaii after “irreversible battery damage” occurred. The flight is now scheduled to be completed in April 2016, an indication perhaps of the many great new technologies that have yet to mature before being usable on a broad scale.
Silver also gained market share in sports clothing, healthcare and consumer electronics where its anti-microbial properties shine. Lastly, the markets for ethylene oxide based applications in plastics and other petrochemical products sustain the use of silver on a large scale as the preferred catalyst. Will it be enough to boost silver in 2016? Probably not, but the trend is clear, and it points towards sustainable growth in industrial silver uses.

Platinum Group Metals

Other than gold and silver, the majority of the main platinum group metals (PGMs, platinum, palladium and rhodium) finds industrial uses. In 2015, it was impossible to ignore the Volkswagen “Dieselgate” scandal which had and still has the potential to shake up the entire car industry on different levels. The automotive industry still uses nearly half of the world’s PGMs in car catalysts. Aspects, therefore, are:

  • Will consumers stop buying diesel powered cars? Diesels, with their specific particle and NOX emission issues require more sophisticated after-treatment than gasoline powered cars. Recent market research indicates that, at least in Europe, the incident had no effect on sales. In fact, sales are predicted to keep increasing. In Germany, Europe’s largest economy, 48.1% of all passenger cars (14.1 million units) are diesel powered. By 2017, the number will be more than 15 million. Diesels play only a very minor role in the USA, so all eyes will be in China and its response to ever growing environmental issues that are likely to eventually drive legislation towards emission-free driving.
  • Will the incident lead to changes in technology? Pre-VW, diesel catalysts were a cost driven commodity. At this point, car manufacturers are scrambling to exceed legal requirements and contain the fallout of the event. PGM usage is, therefore, likely to increase short term to meet these goals.
  • Will the event shift markets towards emission-free technologies? Yes, but not short term. Not only have fuel prices reached a long-term low removing a key incentive to many consumers. Available alternatives like hybrids or battery-electric vehicles have yet to make a significant impact on sales, and hydrogen electric cars are still in a state of incubation.

Like gold and silver, PGMs are being used in new technologies but none of them is likely to enter the market in 2016 on a scale big enough to influence the physical market. Automotive will therefore be the key component in driving the market, and it looks solid for next year. The general conclusion, however, is that industrial developments are unlikely to move precious metal prices in 2016 on a large scale.

How about other metals, like rare earth elements or strategic metals that are used in electronics, electric vehicles, our homes and everything else with an electric motor and / or a battery? Parts 2 and 3 of this series will explore them.

Bodo Albrecht
President – BASIQ Corp.