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Q&A-Platinum's discount to palladium sparking thoughts of substitution-JM

Kitco News

(Messenger chatroom interviews)

By Jan Harvey

LONDON, Oct 12 (Reuters) - Platinum's drop below palladium prices for the first time in 16 years is leading some automakers to consider reintroducing platinum to the mix of metals used in gasoline autocatalysts, Johnson Matthey's general manager for market research Peter Duncan told the Reuters Global Gold Forum on Thursday.

Following are edited excerpts from the conversation:

Q: To what extent are automakers and autocatalyst manufacturers in the position to switch between catalyst loading composition based on palladium-platinum price parity?

A: I would say that it is very early days for platinum substitution back into gasoline catalysts. The problem is that it is very expensive and time-consuming to change catalyst designs, so original equipment manufacturers (OEMs) need to be very sure that by the time they have done it was still worth doing. So, they will want to see the price of palladium above that of platinum for some time.

However, some OEMs are now looking at dual "homologation" i.e. testing two catalyst systems, one with platinum, one without. I see this happening more over time if the palladium price remains above the platinum price.

Q: How far do you see the move away from diesel cars in Europe cutting diesel autocatalyst demand?

A: According to (industry research group) LMC, sales of diesel cars in Western Europe fell from 45.1 percent of the market in July to 42.7 percent in August. We base our platinum group metals demand forecast on LMC's outlook, and their last report showed diesel share (including diesel hybrids) falling to about 39 percent of European production in 2022 from around 47 percent this year.

Q: How far could the impact on platinum group metals demand be softened by the impact of tightening emissions standards on loadings?

A: We expect average PGM loadings of diesel car catalysts in Europe to decline by around 10-12 percent over the next 5 years, and those of gasoline cars to increase by around 15 percent. Legislation is getter tougher, but catalyst technologies are evolving, leading to a reduction in average PGM loadings in diesel systems.

Q: What does that mean for platinum and palladium demand from the European auto market?

A: The period when we could always expect platinum demand in European vehicle catalysts to rise is over - now we need to look to markets like India and China to replace that growth. Demand for platinum in European car catalysts will show a decline over the next 5 years, whilst that of palladium will rise.

Q: How will tightening emissions standards in China affect loadings of both platinum and palladium there?

A: Chinese emissions legislation is aggressive and it's real. China is set to introduce China 6a from 2020. We anticipate that many OEMs will skip 6a and adopt an early-stage approach to China 6b, which is amongst the toughest emissions legislation anywhere in the world. This will drive loadings significantly higher.

Q: What's your view of platinum and palladium demand growth from the automotive sector over the next year? And the next five?

A: Between now and 2022, platinum demand will grow less than palladium demand, but we see the global automotive demand figure for both metals higher in 2022 than in this year.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-2017 asset returns: GRAPHIC-Plat/palladium ratio: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Jan Harvey, editing by David Evans)

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