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Sceptics raise flag on Pd substitution Posted: Fri, 26 Jan 2007 [miningmx.com] -- THE substitution of platinum with sister metal, palladium, in the manufacture of autocatalysts may not be as significant as forecast, industry experts warn. “People have been saying that [substitution of platinum with palladium] for a good two decades now and nothing has come it,” said Roger Pitot, executive director of South Africa’s National Association of Automotive Component and Allied Manufacturers. “Every year you’ll hear of someone saying they’ve found a cheaper way to mop up these noxious gasses. But at the end of the day, platinum is still being used,” he said in an interview with Miningmx. According to SA’s Catalytic Converter Interest Group (CCIG), South Africa produced 14%, or one in seven of the world’s catalytic converters in 2005. As it stands, platinum accounts for just less than 50% of the metals used in autocatalysis, with palladium and rhodium comprising the balance. Joe Armstrong, commercial director at Johnson Matthey (South Africa), and chairman of the CCIG, said diesel engines can only use two platinum group metals (PGM), in various combinations: either platinum alone or, more rarely platinum and palladium, a recent technological development. “Currently it is only possible to replace about 25% of the platinum with palladium for a diesel engine application,” he said. The process is also expensive, which limits some of the cost gains from switching to palladium, Armstrong said. This raises a flag over forecasts palladium could make healthy price gains this year, at the expense of platinum. Price forecasts JP Morgan said in a recent report that the average platinum price would fall more than 11% by 2008 to $1,025/oz as physical demand from jewellers fell and substitution kicked in. Platinum averaged $1,143/oz in 2006. “The price of palladium is unusually low relative to platinum, which poses a risk that autocatalysts used for petrol/gas powered vehicles, which may currently be platinum-based, could be switched over to palladium,” it said. Nevertheless, JPMorgan concedes it is puzzled at the slow pace at which substitution effect from platinum to palladium has taken place. As an alternative explanation, it said historical palladium supply misbehaviour by the Russians in the late 1990’s, which saw the price spike to $1100/oz on tight supply, may have deterred automobile manufacturers from putting too much faith in the metal. Investment demand But there’s another view that in general with all commodities, the PGM sector is being heavily influenced by investment demand. “It doesn’t matter whether physical demand from China falls or whether autocatalyst manufacturers use chicken dung instead of platinum in their catalytic converters,” said one Johannesburg mining analyst who asked to remain anonymous. “What matters is the weight of money that is filtering into commodities through the futures market,” he said. “This speculative element is what’s driving the price of the metal and commodities in general.” Click Here to subscribe to our daily newsletter
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