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(Kitco News) - Hydrogen fuel cell vehicles represent just one segment of an expanding market for hydrogen, which some see as the fuel of the future. That's according to a recent report from Commerzbank Research, which states that hydrogen is becoming increasingly important as an energy carrier and in achieving climate targets.
The German bank expects that as the hydrogen economy grows, so will the demand for platinum. Quoting data from the World Platinum Investment Council WPIC, Commerzbank said that platinum demand in the production of hydrogen is expected to grow from 48,000 ounces last year to 2.7 million ounces by 2030.
“Hydrogen applications are also expected to account for one-third of total platinum demand by the end of the 2030s,” wrote Carsten Fritsch, commodity analyst at Commerzbank and author of the report.
According to the WPIC, while hydrogen-related demand for platinum is currently minor, it is expected to grow substantially through the 2020s and beyond, reaching as much as 35% of total annual platinum demand by 2040.
Although the growing hydrogen economy is expected to be a robust source of new demand for platinum, prices are struggling to find new bullish momentum. October platinum continues to test support just above $900 an ounce, last trading at $920.10.
Because most hydrogen is still produced using coal or natural gas, the focus now is on “green hydrogen,” which is created by splitting water by electrolysis using electricity generated from renewable energies.
Platinum group metals are utilized in the production of green hydrogen and in fuel cells, a process in which platinum plays a prominent role.
The fuel cell electric vehicle market (FCEV) is a small but growing use of platinum.
In FCEVs, power is produced by converting chemical energy to electrical energy using a platinum catalyst. The only by-products are water and heat, meaning FCEVs produce zero tailpipe emissions.
Commerzbank noted that investors should pay attention to Europe's evolving hydrogen economy, with Germany becoming a world leader.
The country plans to build a 1,800-kilometer network of retrofitted or new hydrogen pipelines by 2027-28 and to connect all major generation, import, and storage centers with relevant end-users by 2030. A pilot project will make up to 200 fuel-cell electric vehicle taxis available in Berlin using Toyota's hydrogen fuel cell, Mirai.
At the end of 2022, Germany had 105 hydrogen refueling stations, the most in Europe.
Commerzbank explained that the European Union plans to increase the annual demand for green or renewable hydrogen to 20 million tons by 2030. The European Parliament recently stipulated that hydrogen's share in industry must reach 42% in EU member states, including a minimum 1% quota for the transportation sector. BNEF estimates this will create up to 4.2 million tons of annual demand for renewable hydrogen by the end of the decade.
The International Energy Agency forecasts almost 100 million tons of low-emission hydrogen will be needed by 2030 to meet climate neutrality targets by mid-century.
Across the Atlantic, the United States aims to produce 10 million tons per year of clean hydrogen by the end of the decade, with US$9.5 billion in funding available through the Bipartisan Infrastructure Law passed in 2021.
Hydrogen made from fossil fuels is mainly used in crude oil refining, the production of ammonia for fertilizers, and in making methanol for paints and plastics. Future applications target carbon-intensive industries such as steelmaking and transportation. There are also roles for hydrogen in marine engines and aviation to balance out fluctuations in the electrical grid and even as an eventual substitute for natural gas.
As hydrogen production increases, the demand for platinum, Fritsch, said existing resources must be used efficiently. Due to problems in South Africa, by far the largest producer, necessary investments in new platinum mines are unlikely to materialize. One way is through recycling, which currently accounts for almost a quarter of the global platinum supply.
In the future, if half of the current 40% of total platinum demand used by the auto industry in catalytic converters becomes available, it would amount to 1.5 to 1.6 million ounces per year of platinum.
The report says there is potential for considerable savings through recycling. According to the Hydrogen Council, 25% of the need for mine supply from the hydrogen sector could be met by scrapping vehicles in the EU alone.