Green hydrogen to boost South African miners

As one of the continent’s largest platinum group metals (PGMs), South Africa’s mining industry is set to receive a boost as global demand for green hydrogen rises due to carbon emission reduction policies and growing energy needs.

This is according to Energy Capital & Power, Africa’s leading investment platform for the energy sector.

PGMs, which include platinum, palladium, rhodium, iridium, osmium and ruthenium, are well-positioned in the global market.

According to market research firm Mordor Intelligence, PGMs will record a 4.47% increase between now and 2029.

This market growth partly comes from the growing demand for PGMs in green technologies, including hydrogen energy technologies. 

Africa, home to the world’s largest PGM reserves, is well-positioned to benefit from this growth. New opportunities are expected to be generated across Africa’s mining and hydrogen value chains.

“These metals play a vital role in fuel cell technology, enabling the production of electricity from hydrogen and oxygen,” Energy Capital & Power said.

The continent holds substantial potential for green hydrogen production, given its abundance of co-located renewable resources.

South Africa, in particular, stands to benefit, as the country possesses over 80% of global resources. 

As African countries intensify their green hydrogen activities, long-term PGM demand is expected to grow substantially.

PGMs power a wide range of applications, from hydrogen fuel cell vehicles to stationary power generation to industrial processes.

According to the European Investment Bank, Africa has the potential to produce 50 million tonnes of green hydrogen per annum by 2035, which could help meet power, transportation and industrial energy needs, decarbonise heavy-polluting industries, and be used for global export.

Many companies have started to notice the potential of green hydrogen to drive regional energy security and are investing in Africa as a result.

This includes South African tourism, trade and investment agency Wesgro, which recently signed an agreement with the Northern Cape Economic Development, Trade and Investment Promotion Agency, Namibia’s Environmental Investment Fund and infrastructure company Gasunie and Climate Fund Managers. 

Energy Capital & Power said the agreement allows the parties to assess the feasibility of developing a green hydrogen corridor connecting the Western Cape and Northern Cape provinces of South Africa with Lüderitz in Namibia. 

“Furthermore, green energy companies Hive Energy UK and Genesis Eco-Energy are developing a R105 billion green hydrogen and ammonia project in the Coega Special Economic Zone in the Eastern Cape province of South Africa,” the organisation said.

“The project will add 14,400 MW of electricity to the grid and produce 900,000 tonnes of green ammonia for export to global markets, increasing the country’s export revenue.”

“South Africa has also established a $1 billion fund in partnership with the Netherlands, aimed at accelerating the deployment of green hydrogen projects to feed growing demand in Europe.”

Energy Capital & Power explained that private and public sector entities in South Africa are demonstrating the potential for synergy between PGMs and green hydrogen, specifically in hydrogen fuel cell vehicles.

For example, last October, Anglo American entered into a partnership with BMW South Africa and Sasol to develop South Africa’s PGMs and green hydrogen value chains. 

Under this agreement, Anglo American will provide PGMs used in hydrogen fuel-cell vehicles, Sasol will provide green hydrogen, and BMW will provide the vehicles.

Struggles in the mining sector 

These developments are coming at a particularly challenging time for the South African mining industry.

According to BMI senior metals and mining analyst Olga Savina, unreliable energy and transport infrastructure and an uncertain and inefficient regulatory environment resulted in significant administrative challenges for the mining sector.

BMI said that they expected these challenges to continue for the rest of the year, limiting the industry’s short-term outlook.

These difficulties have impacted mining companies’ performance on the stock market as well.

Between 1 January and 6 June 2024, the share prices of nearly all of South Africa’s listed platinum miners fell.

While some platinum miners, such as Eastern Platinum and Impala Platinum, performed well on the JSE during this period, other listed companies had less positive results. 

Anglo American Platinum fell the most, at 35.46% year-to-date, followed by Northam Platinum and Sibanye-Stillwater, which also experienced negative share price growth.

Experts and industry roleplayers in South Africa’s platinum mining industry have said that the industry faces severe pressure, and job cuts have increased significantly over the past years.

Global economic slowdown has decreased the demand for PGMs, particularly platinum, palladium, and rhodium, resulting in price drops and profit declines for these miners. 

High labour costs and unstable electricity have also hit the industry hard. Over the last few years, persistent load-shedding has threatened mining operations and the safety of mines, jeopardising projected mining output.

Many South African mining companies have had to cut their production to reduce costs since they cannot export their commodities due to deteriorating rail infrastructure and port backlogs.   

Transnet has faced difficulties hauling minerals to ports due to cable theft and infrastructure vandalism. 

However, progress is being made on the energy and transportation fronts. 

Eskom’s supply is becoming more stable, power cuts have slowed, and progress is being made towards a more liberalised energy market.

Structural reforms and recovery initiatives are also underway to stabilise Transnet’s rail and port services and promote private sector participation. 

“Our Infrastructure team believes that if the reform agenda is successfully realised, it will significantly enhance operational efficiency, thereby alleviating a key growth constraint in the sector,” BMI said.