EDITORIAL & OPINION – FACTS ‘N’ FIGURES — Price rise undercuts palladium market

The volatility of palladium supply and the consequent rise in prices put the long-term future of the palladium market in doubt, according to a new study.

As prices of platinum and palladium converge, one of the major reasons for using palladium in a number of applications is disappearing. Moreover, although palladium is technically better than platinum in its main auto-catalytic application, the perception of relative stability in the long-term supply of platinum may result in a move back to it. In the meantime, thrift on the part of consumers may result in the loss of some of the traditional markets for palladium, such as dentistry and electronics.

The adoption of palladium as the main automobile emissions catalyst has led to its emergence as the principal platinum group element, rather than platinum.

The implications, in terms of both the volume and value of the market, are far-reaching, particularly at a time when the largest traditional source of palladium — Russia — appears incapable of meeting demand with new production. As a result, the palladium market since 1996 has been in a severe deficit, dependent on releases from the large but finite Russian stockpile built up over many years of production.

Autocatalysts, by far the largest use of PGMs, accounted for 45% of total consumption in 1998. Palladium consumption was 4.2 million oz., about 50% of total consumption. Efforts to meet ever-tightening automobile exhaust emission standards in Europe and North America have resulted in demand for autocatalysts with heavy loadings of palladium to oxidize hydrocarbons.

Palladium’s resistance to heat has made it particularly effective in starter bricks, located close to the engine, which heat up quickly and control emissions after startup. They are also suitable for small, fuel-efficient cars with high engine speeds, such as those on the European market.

Platinum electrodes in fuel cells have the potential to be the next major end use for platinum, contingent on the fuel cell being adopted as the power source for zero-emission vehicles. Several major car makers plan to introduce fuel-cell cars on a commercial scale by 2004-2005, by which time some 100,000 fuel-cell cars could be on the road. Each such car will use about 10 grams of platinum, or about 320,000 oz. for every million vehicles.

Jewelry remains the largest use for platinum, with considerable growth in demand from China coinciding with a decline in its use in autocatalysts. Japan and China have the largest platinum jewelry markets, having used 1.25 million oz. and 500,000 oz., respectively, in 1998.

— The preceding is an excerpt from The Economics of Platinum Group Metals, published by Roskill Information Services.