South Korea’s H2 plans support future platinum demand
19 December 2023
South Korea’s strategy to decarbonise its highly industrialised economy relies heavily on using green hydrogen which will result in it becoming a significant platinum demand hub, reaching 300 koz p.a. by 2030, from use in electrolysers to produce green hydrogen (40 koz pa) through to Fuel Cell Electric Vehicles (FCEVs) (230 koz p.a.).
South Korea’s disproportionate reliance on imported fossil fuels for ~85% of its energy consumption, poses security concerns and maintains high carbon intensity in industries such as auto-manufacturing, shipbuilding, and steelmaking. To tackle this, increasing investment—over US$40 billion— is earmarked through public-private partnerships to harness hydrogen (H2) technologies across the entire value chain. This will result in platinum demand increasing by up to 300 koz p.a. by 2030, due to the manufacturing and installation of platinum containing PEM electrolysers and in fuel cells in South Korean-supported projects both domestically and overseas.
Platinum’s largest demand growth will come from fuel cell production with South Korea targeting up to 1.8 million light-duty (LD) and 30,000 heavy-duty (HD) FCEVs by 2030 (Fig 3). Battery Electric Vehicles (BEVs) are currently the preferred technology route for LD vehicles ahead of FCEV, as recharging infrastructure is already developing. While South Korea’s LD target seems challenging to deliver, the strong market emerging for light-commercial and HD FCEVs, where quick refuelling, high capacity-utilisation-rates, and long-distance travel favour FC technology, should assist. Additionally, stationary power and nascent mobility applications such as marine and off-road are gaining traction. Because fuel cell stacks can be used in LD, HD, and off-road FCEV applications, using single or multiple units, and based on market preference, this provides manufacturers with flexibility to build stack capacity at lower overall risk. This is highlighted by Hyundai’s US$1.1 billion commitment to expand their annual Incheon fuel cell stack production capacity to 123,000 stacks (12 GW). We believe Hyundai’s growth and the entry of other players could lift South Korea’s FCEV stack capacity to 160 GW by 2030, increasing platinum demand to 230 koz p.a.
Additionally, platinum containing PEM electrolysers are a key enabler to produce green H2 to decarbonise transport, power generation and industrial applications. South Korea has already issued tender RFPs and set up global project partnerships, including the world’s first H2 power generation contracts which grow from 4 TWh to 13 TWh with an obligated grey to green H2 ratio moving from 6:1 to 1:1 by 2030. This requires 18 GW of electrolyser capacity to meet South Korea’s total green H2 demand of 2.2 Mt by 2030. Assuming only a conservative 30% PEM market share would add 80 koz of annual global demand by 2030. Combined South Korean platinum demand from PEM electrolysers and fuel cells could grow at a CAGR of 43% (2024 – 2030) and exceed 300 koz p.a. by 2030.
Platinum’s attraction as an investment asset arises from:
- WPIC research indicates the platinum market entering a period of consecutive deficits from 2023.
- Platinum can be considered a proxy for investing in the growing hydrogen economy given its use in electrolysers and fuel cells.
- Platinum supply remains challenged, hampered by electricity shortages in South Africa and sanctions against Russia.
- Automotive platinum demand growth should continue due principally to substitution in gasoline vehicles.
- The platinum price remains historically undervalued and significantly below both gold and palladium.
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