Substitution of palladium with platinum in three-way autocatalysts will help to offset platinum’s decline in time, but near-term upside is limited. A modest level of substitution is expected in gasoline autocatalysts from 2021, initially in the US where vehicles are generally larger with lower temperature engines. In China and Europe, car manufacturers have prioritised meeting increasingly tight emissions legislation, so will be behind on changing catalyst formulations compared to the US.
However, a sustained palladium price above that of platinum could be tipping the balance in favour of increased substitution, which is necessary to bring both the platinum and palladium markets closer to balance. Palladium has traded at an average of $2,187/oz this year, despite being in the midst of a pandemic and a global recession, with significant contractions to demand. The palladium market deficit is forecast to shrink to around 340 koz this year (as demand was impacted more than supply by Covid-19), and again in 2021 due to work-in-progress stock but is expected to expand significantly thereafter as light-vehicle production recovers.
Both platinum and palladium are industrial metals with precious metal attributes. They have both been used for catalytic converters and it usually takes a very large move to initiate the retooling necessary to switch from one to the other.Click HERE to subscribe to Fuller Treacy Money Back to top