By Nqobile Dludla

RUSTENBURG South Africa, Sept 19 (Reuters) - Global

primary platinum group metal production could fall by as much as

20% by the end of this decade, widening a supply deficit,

Valterra Platinum CEO Craig Miller said on Thursday.

Miller said demand from carmakers, who use platinum,

palladium and rhodium in catalytic converters, had remained

robust, driven by higher sales of both conventional and hybrid

vehicles, with the energy transition unfolding more slowly than

forecast.

He added that demand from jewellery manufacturers had also

been strong.

South African mining companies, which account for more than

70% of the world's platinum supply, have cut unprofitable

production over the past two years after metal prices collapsed,

amid warnings that the industry was in terminal decline.

While the recent platinum rally has brought relief to

miners, it is still below levels needed to support new

production.

"Primary supply is constrained and secondary supply is just

not coming to the market because the cost of recycling is still

too expensive," Miller told reporters after a tour of Valterra's

converter and processing plants.

He said the company estimates primary supply will decline by

"between 15% and 20%" by the end of this decade due to a lack of

investment in new mines and in extending the lives of existing

assets.

"You'd need to see the PGM basket price increase by another

50% from where we are now and for it to be maintained at that

level to incentivize new greenfield production coming online and

earning a sort of a 10% return," Miller said.

He said the energy transition is not going to be as

anticipated, "so we could see ICE (petrol) vehicles or hybrid

vehicles around for a lot longer", he added. "Hybrid vehicles

have more PGM loadings than an ICE vehicle does."