Technology keeps platinum on a roller coaster

News that Japanese automaker Nissan has developed a platinum-free catalytic converter recently sent platinum futures prices in New York falling and palladium prices climbing.

It was a brief market fluster, however.

Catalytic converters are used to render toxic automobile engine emissions non-harmful, with platinum group metals (pgm) performing the important catalytic functions. Nissan’s new converter would substitute palladium and other metals for the more expensive platinum.

On the New York Mercantile Exchange, the platinum price tumbled by more than US$20 per oz., while palladium shot up by about US$6.

By the next day, the rally had fizzled. Platinum futures prices recovered somewhat and palladium futures were heading downward.

The cash price for platinum in New York has been trading below US$400 per oz., still higher than the cash price for gold but far from the premium experienced in the latter part of the 1980s. Palladium has been trading below US$100 per oz.

In late 1988, news that automaker Ford in the U.S. was developing a catalytic converter that did not use platinum had a similar effect on the metal’s price. At that time, the cash price in New York for platinum was about US$600.

During the first half of 1989, platinum and palladium prices reacted to news of a scientific experiment in which elements containing the metals were allegedly used to produce nuclear fusion. (Two years later, the jury still appears to be out on the “cold fusion” experiment.)

International metals dealer Johnson Matthey, in its annual report on the pgm industry, Platinum 1991, said global demand for platinum in 1990 increased by 5.5% to a record 3.66 million oz. Primary supplies grew at a faster rate and the platinum market drifted into marginal oversupply last year.

Prices weakened on fears of recession which were accentuated by the Persian Gulf crisis during the latter half of 1990. The average price in London for platinum fell to US$472 per oz. in 1990 from US$509 the previous year.

Johnson Matthey said demand for platinum for autocatalysts last year grew to 1.52 million oz. (about 42% of total demand). Growth in Europe and Japan was tempered by the slump in vehicle sales and production in North America.

Demand for platinum in jewelry rose to 1.4 million oz. (about 37% of total demand). Production of platinum jewelry for sale in Japan was encouraged by its popularity among young consumers and the growth of the retail network, the report said.

Industrial demand was up by 7.5%, driven by capacity expansions in the petroleum and chemical industries.

Global supplies rose by 9% in 1990 to 3.73 million oz. South Africa experienced production difficulties and its output grew modestly to 2.78 million oz. (about 75% of total supply). The Soviet Union had its best year of sales in more than 15 years, supplying 700,000 oz. platinum (about 19% of the total) to the market.

For 1991, Johnson Matthey predicts another moderate surplus of supply over demand, with occasional periods of tightness in supply. It foresees a possible price rise toward US$450 in conjunction with improving economic conditions.

Environmentally friendly fuel cells, the company says, may be the next major industrial application for bulk quantities of platinum. Fuel cells produce electricity from a controlled chemical reaction between hydrogen and oxygen; the phosphoric acid fuel cell, among the more developed of these cells, uses an electrolyte with a platinum catalyst.

The report also said palladium demand last year fell short of supplies while the high-priced rhodium market was in deficit in 1990.