Palladium in Cars Set for Record on China, Matthey Says

(Bloomberg) -- Automotive demand for platinum and palladium is set to continue marching in opposite directions this year, according to a leading maker of autocatalysts.

Palladium consumption in the devices used to clean up exhaust fumes will rise to a record in 2018 as the appetite for gasoline vehicles increases, according to a report from Johnson Matthey Plc. Chinese automotive sales are a main driver, with tougher pollution control forcing carmakers to increase the amount of precious metal they use.

“The prospect of significant growth in Chinese palladium loadings has moved closer, because it looks increasingly likely that some cities and provinces will implement” new regulations early, Peter Duncan, the general manager of market research at U.K.-based Matthey, said in the report. “This could happen as early as next year and would result in a double-digit increase in palladium consumption on Chinese cars.”

Platinum, meanwhile, will suffer a double whammy as fewer new diesel automobiles are sold and older ones are scrapped, feeding the supply-side with metal harvested from old catalytic converters. Diesel vehicles, which use more platinum, have become less popular after some automakers admitted to cheating in emissions tests to gain regulatory approval.

The platinum market will move further into surplus in 2018 as a rise in industrial demand is outweighed by the decline in autocatalyst consumption and less investment buying. Mine production will remain weak, Matthey said.

Deeper Dive

Platinum:

  • Supply seen falling 58,000 oz to 6.054m oz in 2018
    • South African production to fall 49,000 oz to 4.41m oz
    • Russia output to fall 30,000 oz to 662,000 oz
  • Demand net of recycling to fall 273,000 oz to 5.738m oz
    • Autocatalyst sector to shrink 108,000 oz to 3.184m oz
    • Chemical makers will buy 47,000 oz more, snapping up 551,000 oz
    • Jewelry market to shrink 38,000 oz to 2.258m oz

Palladium:

  • Total mine supply to climb 509,000 oz to 6.88m oz
    • Russia to reclaim spot as top producer as output climbs 380,000 oz to 2.787m oz
    • South African production to rise 97,000 oz to 2.651m oz
  • Demand net of recycling seen falling 53,000 oz to 7.119m oz
    • Use in autocatalysts to rise 174,000 oz to 8.565m oz
      • Consumption jumped by 450,000 oz in 2017
    • Recycling to rise 192,000 oz to 3.099m oz
    • Electrical sector to decline by 12,000 oz to 828,000 oz

Rhodium:

  • Combined primary and secondary shipments of rhodium are forecast to rise by 3 percent in 2018, based on further growth in autocatalyst recycling, and assuming that South African producers sell all their production this year.
  • Total demand is seen contracting 3 percent
  • Market seen moving back into surplus in 2018 from balance last year.

©2018 Bloomberg L.P.