GM Cautious on Platinum Switch Even as Palladium Hits Record

(Bloomberg) -- Palladium’s surge to a record has intensified talk among analysts that carmakers will look to replace it with cheaper platinum for use in pollution-control devices. The auto industry’s answer: Not so fast.

Palladium, mainly used to control emissions from gasoline engines, is trading near the highest relative to platinum since 2001 as consumers move away from diesel vehicles, where platinum is more widely used. Tensions between the U.S. and Russia, a top supplier, and forecasts for shortages are also lifting palladium.

Still, while carmakers can substitute palladium with platinum, retooling factories is expensive and the metal makes up a relatively small part of their costs.

“It’s not a flick of a switch for us,” Rahul Mital, global technical specialist, diesel aftertreatment at General Motors Co., said in a panel discussion at a London Bullion Market Association meeting in Boston Monday. “Any time you want to make a substitution like that, it is at least 18 months to a two-year cycle if we’re going to switch. We have to be careful that by the time we do all that,” price changes don’t negate the benefits, he said.

“If palladium pressure continues, you will see those results,” Mital said.

GM Cautious on Platinum Switch Even as Palladium Hits Record

Platinum fell to an almost 10-year low in August and was trading at about $833 an ounce on Tuesday. That’s more than $250 below palladium’s level at about $1,089 an ounce.

But palladium’s elevated price is not sustainable because of the softening global car market, especially in China, according to Carsten Menke, commodities research analyst at Bank Julius Baer Group Ltd. The bank sees the price falling to $950 an ounce in three months and $900 an ounce in 12 months.

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