Anglo American’s (AAL) share price has halved since its high-water mark in April 2022. Many of its mining counterparts have also seen their financial performance deteriorate due to erratic prices for industrial metals. Yet Anglo’s decline is far more pronounced than the 12 per cent reversal registered by the MSCI World Metals and Mining index over the same two-year period.
The group has struggled to cope with the slump in platinum group metals (PGM) prices. Exposure comes through its controlling 78.6 per cent stake in Anglo American Platinum (ZA: AMS), the world's largest platinum producer. There appears to be little respite on the horizon, with some industry voices warning that the depressed pricing environment could persist over the next couple of years. That’s worrying given that PGMs still accounted for 12 per cent of the group’s underlying cash profits in 2023, down from 30 per cent in the prior year.
The problems in the platinum market are intertwined with the external issues that have hurt the global automotive industry. Automakers amassed excess PGM inventories due to the disruption wrought by the pandemic and the global semiconductor shortage. And while demand levels recovered through last year, excess inventory can’t be unwound overnight. Strange as it may seem, we have witnessed a situation where PGM prices have been in retreat despite a persistent supply shortage.