[miningmx.com] – THE negative effects of the Volkswagen AG scandal had been “greatly overstated” and that diesel car engines in western Europe would remain a major part of the car market, said the World Platinum Investment Council (WPIC).
Commenting in its third quarter review, CEO of the WPIC, Paul Wilson, said the prospects of the diesel autocatalysis sector remained key to platinum demand growth. “We believe there is as much upside, as downside, for platinum demand from recent events,” he said.
Earlier this year, Volkswagen was found to have been cheating in emission tests by making its cars appear far less polluting than they are.
The US Environmental Protection Agency discovered that 482,000 VW diesel cars on American roads were emitting up to 40 times more toxic fumes than permitted – and VW has since admitted the cheat affects 11 million cars worldwide.
Analysts have since attempted to assess the negative and potentially positive consequences of the scandal.
On one hand, it could lead to an increase in platinum group metal demand from the auto industry, as original engine manufacturers scale back thrifting programmes and potentially bolster after treatment technologies to reduce emissions.
Alternatively, should 25% of the 11 million impacted vehicles select gasoline rather than diesel replacements in the event of a recall, this could provide an additional 250,000 ounces of short-term supply.
“The last quarter has understandably been overshadowed by concerns about the impact of the VW scandal on diesel engines and the need for platinum catalysis. However, we believe that the negative implications for platinum demand, in both scale and rate of change, have been greatly overstated,” said Wilson.
“While October’s vehicle sales showed some slowing of growth, diesel cars in Western Europe are set to remain a major part of the car market and the largest global consumers of platinum for autocatalysts, so the prospects for this sector remain key to platinum demand growth,” he said.
The WIPC found in its report that the platinum market would be “close to balance in 2016” after earlier forecasting a supply deficit.
Total mining supply and recycled platinum was forecast to increase, with more modest demand growth across jewellery, industrial and investment segments,” it said. The major supply-side sensitivities for the current outlook include possible supply disruption during wage negotiations in South Africa, it said.
Total platinum demand is forecast to rise by 2% as automotive, industrial and jewellery demand growth offset the forecast decline in investment demand.
For 2015, the global platinum market deficit forecast has been reduced to 300,000 ounces from the 445,000 oz forecast in the second quarter.
Total platinum supply is expected to increase by 6% to 7,73 million oz while total demand is forecast to expand slightly to a shade over eight million oz.
In the third quarter, South African refined production was 1,11 million, up 240,000 oz year-on-year due to the post-strike recovery, but down on second quarter of 2015 due to safety-related stoppages and smelter maintenance that increased pipeline lockups.
