Car companies are adjusting the ratios of precious metals used in vehicle antipollution systems after the price of palladium plunged last week, baulking at paying sky-high prices for platinum when the two are almost interchangeable in many vehicles, industry sources told Reuters, which noted that platinum hit a 23-year high this month at $US707 an ounce.
Reuters said that Detroit’s Big Three are not, however, racing back to buy palladium after it dropped below $US200 an ounce last Tuesday for the first time since December 1997.
General Motors, DaimlerChrysler and Ford have been burned by the market in recent years and are thought to have huge stockpiles to work off. Ford lost $1 billion in 2001 on palladium inventory price declines, Reuters said.
“We’ve certainly seen a bit more interest from car companies at these levels,” Gordon Bassett, general manager of US precious metals for refining and chemical company Johnson Matthey, told Reuters.
“They have been looking at that over last few months anyway, just to see what kind opportunity there is to balance their usage a bit better. Rather than swing one way and swing the other way,” Bassett added.
Reuters said that, in a reversal of fortunes since hitting all-time highs two years ago, palladium, currently near $195 an ounce, is about $455 cheaper than last Wednesday’s platinum price of around $650.
In January 2001, palladium hit its highest price ever at $1,095 an ounce as car makers fought to stockpile the metal in the face of tighter exhaust emissions rules and erratic exports from Russia, the main supplier, Reuters said, adding that was about $455 more costly than platinum’s $644 an ounce, at the time a 13-year high.
“They can switch a lot quicker than people think,” a platinum expert at a New York trading firm told the news agency. “People are trying to gauge how much they are willing to switch.”
The vehicle sector is the main buyer of palladium while platinum is also used extensively in jewellery, Reuters noted.
Reuters said that car makers have in the past complained bitterly of unexplained disruptions in Russian palladium shipments. The situation deteriorated so badly that General Motors once dubbed palladium “unobtainium” and then swiftly changed its name to “plentium”, the news agency added.
Reuters said that palladium is considered to be somewhat more efficient than platinum as a catalyst in petrol engines, especially for cold start emissions, but only platinum can be used in diesel engines, which are an important part of Europe’s car market.
Palladium has lost 50% of its value this year and is down 82% from its highs, Reuters said, adding that weak car sales bit into usage and car makers loaded catalytic converters with metal they hoarded when palladium prices were rising.
Manufacturers have developed less palladium-intensive technologies and switched back to platinum, mostly in systems that used one or the other in combination with their sister metal, rhodium, Reuters said.
The news agency said palladium supply is somewhat more dependable than it was in 2000, and less dependent on Russia. South Africa, which is the world’s largest producer of platinum, cranked up palladium production during the crunch. Dealers told Reuters that supply contracts with South African producers were not all being drawn against, leaving an excess to be sold in the market.
Reuters said that GM reduced its use of platinum group metals by 45% from 1999 to 2001 and vowed to cut back another 17% by 2006 by ensuring its engineers keep future loadings at not more than 1.5 grams of platinum, 3.0 grams of palladium and 0.3 gram of rhodium per vehicle.