AI driving a new era of PGM demand

• Platinum and palladium prices have been extremely volatile in 2026

• Analysts cautiously optimistic on the outlook given new industrial demand

• Terra Metals fast-tracking Southwest PGM discovery in WA, which it believes has potential to be the ‘Fortescue of polymetallic’ 

 

It’s been a volatile year for precious metals, particularly the platinum group metals.

Just as gold and silver were hitting new highs in late January, platinum almost touched a new record of US$3000 an ounce.

Since then, the price has more than halved, with palladium in the same boat.

“Platinum price volatility has reflected changing monetary policy expectations, geopolitical uncertainty and shifts in investor positioning,” Metals Focus said last month. 

“Disruptions to global energy markets and persistent inflation concerns have complicated the interest rate outlook. 

“Meanwhile, higher bond yields have periodically weighed on precious metals.”

While volatile prices presented challenges for jewellery demand, the consultancy sees increases in industrial platinum consumption, supported by demand from the artificial intelligence sector.

 

Industrial demand

Metals Focus believes industrial demand will increase by 8% year-on-year, driven by glass and electronics.

“In electronics, growth is primarily driven by the ongoing expansion of AI data centres and accelerated investment in advanced semiconductors,” it said. 

“This shift signals a gradual transition in the platinum demand narrative, from the ‘exhaust aftertreatment automotive cycle’ towards a ‘high-end manufacturing and computing infrastructure cycle’.”

Platinum is used in three areas across the AI supply chain: electronic-grade fibreglass; optical communications; and advanced packaging and high-end storage.

“Looking ahead, investment in AI infrastructure and advanced electronics is expected to create further opportunities for industrial platinum demand,” Metals Focus said. 

“Expanding data centres and increasingly sophisticated computing requirements could support additional electronic-grade fibreglass capacity and associated platinum bushing requirements.”

It added that AI was creating opportunities for palladium, rhodium, iridium and ruthenium demand.

“However, whether AI-related investment translates into sustained additional PGM consumption will depend on several factors,” Metals Focus said. 

“These include the technologies adopted, the scale of manufacturing capacity additions and subsequent equipment replacement requirements. 

“While these developments could provide an additional source of demand growth, their contribution will vary considerably across individual metals and applications.”

 

Bullish on outlook

Terra Metals (ASX:TM1) managing director Thomas Line is bullish on the outlook for PGMs.

“It’s clear from all average analyst data and all of the big banks and funds that you can see a supply demand deficit coming up, and it’s going to be significant for platinum and palladium,” he told Stockhead.

“A lot of people aren’t aware that every disk they’ve ever used, every hard drive requires PGMs in order to be able to store the data, and there’s a point at which, the more PGMs you use, the more data you can store. 

“So, with all of these data centres going in globally, it hasn’t bumped the PGM market yet, but it’s a huge potential growth market.”

The market for hybrid vehicles is also strong, particularly in the face of higher oil prices.

“People all thought that PGM demand was going to go down when electric vehicles came into the market, but what wasn’t fully acknowledged is that hybrid vehicles were going to become dominant for quite some time, and it remains the case now,” Line said. 

“And they require substantially more platinum, palladium and rhodium in order to be efficient because they’ve got a less efficient combustion that happens in the hybrid engine, which requires 30-40% more PGMs in those.” 

The majority of PGM production comes from Russia and South Africa, and each of these has their share of issues.

For Russia, it’s sanctions, while for South Africa, it’s deep and depleting deposits.

“If you look at [South Africa’s] Marensky Reef, it’s 30cm thick. It’s been mined for 100 years, and it’s going down over 1000-1500m depth,” Line said.

Terra’s Southwest PGM discovery in Western Australia outcrops at surface and is expected to be suited to bulk mechanised open pit mining.

The company is aggressively drilling Southwest with four rigs, undeterred by current market conditions.

“Some people look at commodity prices, look at the market cycle, and they get concerned because you’re investing money in the ground while the market is soft, but in reality, this is the perfect time if you have the cash to be doing the work,” Line said. 

“Because as the cycle turns back round, you’ll be coming to the point of delivering on all of the milestones that you made the investment for.” 

 

The ‘Fortescue of polymetallic’ 

Southwest now extends for around 1350m along strike, 700m across strike and at least 750m down-dip and remains open along strike and down-dip.

A maiden resource is being targeted for the first quarter of 2027, incorporating all of the drilling up until the end of this year.

A scoping study will follow by mid-2027, followed by a prefeasibility study in the first quarter of 2028.

“We’ve got something big. We’ve got something good. We’ve got the team that can deliver on it, and we don’t want to waste any time,” Line said.

“We raised the money, and we have everything we need to deliver from a discovery to a PFS in just over a year, which is unbelievable.”

Line said Terra was already receiving strong interest from banks, large funds, smelters and potential strategic investors.

“While it’s not reflected in the share price right now, and the general understanding of the Australian market or retail market is not there yet, they will be sold with the metallurgy and the resource and the study,” he said. 

“But the customers, the banks, and the large funds do understand what we have, and that engagement is, I would say, quite advanced, considering we don’t even have a resource yet.”

Line said Southwest and the broader Dante project had the potential to be multi-generational.

“I suppose the ‘Fortescue of polymetallic’ is how we look at Southwest and what we’re seeing as a vision for the future,” he said.

“And that’s a modular expansion organically of what starts as a discovery, goes to a resource, becomes a first mine and then you move out to your regional exploration, start adding to the reserve with other discoveries and resource expansions across the project, and over time, do the studies on those and roll those into becoming their own operations. 

“We’re really focused on proving the economics of what’s in front of us and getting that moving, Southwest being the focus, and then looking to unlock the other parts of the project to grow a real company.”

At Stockhead we tell it like it is. While Terra Metals is a Stockhead advertiser, it did not sponsor this article.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.