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BMO: Chinese auto sector to boost platinum demand

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(Kitco News) - The Chinese auto sector looks as though it will boost platinum demand through 2021, said BMO Capital Markets. Chinese auto output rose sharply in June, climbing some 50% year-on-year through the first 20 days of the month, although actual sales may not keep up, BMO said. “We view this as a deliberate move by Chinese OEMs to preload stock of China V compliant passenger vehicles following the change of legislation in May,” BMO said. Analysts explained that manufacturers appear to be hiking output of old models before the July 1 deadline hits for new emissions rules. “In turn, OEMs may focus on selling China V-compliant vehicles while possible and run down inventories through 2H20, a minor negative for palladium demand, as average loadings perhaps don't increase as much as anticipated through 2020,” BMO said. Analysts said platinum demand from the Chinese auto sector is looking “progressively encouraging,” with sales of commercial vehicles on a more aggressive uptrend than autos, down just 1% so far in 2020 compared to last year. “Within this subset, ~70% of sales are diesel,” BMO said. Diesel-powered vehicles require platinum, whereas gasoline-powered cars rely on palladium.

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