TOKYO, Jan 12 (Reuters) – Despite sky-high palladium prices, Japanese automakers are expected to show steady demand for the metal this year since they consider it indispensable for coping with stricter emission regulations, traders said.
Concerned about the metal’s price and long-term availability, carmakers have been searching for ways to use less palladium in autocatalysts, but the effort will likely take a few more years to pay off, they said.
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“I don’t expect palladium consumption in Japan’s autocatalyst sector to fall this year because automakers must use the metal to comply with regulations,” a Japanese trade house manager said.
Japanese commodity broker Daiichi Commodities predicts global palladium demand to rise to 285.9 tonnes this year from an estimated 280.8 tonnes in 2000, while palladium demand for autocatalysts is seen rising to 185 tonnes in 2001 from an estimated 180.2 tonnes in 2000.
Japan is a key user of platinum group metals (PGMs), representing about one-fourth of world platinum and palladium consumption last year.
“There is a talk in the market that the extremely high prices will encourage automakers to replace it with platinum for use in autocatalysts. But so far, palladium demand has been steady while demand for platinum is on the rise,” he said.
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By GlobalDataThe Japanese government introduced tougher pollution-control regulations for gasoline-run cars last October under which emissions of noxious gases such as nitrogen oxides must be cut by 70 percent from previous target levels.
That has caused a rise in loadings of platinum group metals (PGM) for autocatalysts for the domestic market, particularly for platinum because it is cheaper and its supply outlook is more stable and predictable than palladium’s.
Spot palladium was quoted at $US1,035/1,075 an ounce at 0600 GMT, after being fixed at an all-time high of $US1,085 on Thursday. Platinum was quoted at $US630/638 an ounce against Thursday morning’s fixing of $US645, the highest since April 1987.
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South African mines, which represent about 70 percent of world platinum supply, have exported the metal as well as other PGMs steadily to Japanese consumers via long-term contracts.
But PGM exports from Russia, which accounts for two-thirds of the world’s palladium supply, have been erratic since 1997 due to bureaucratic delays in issuing annual export quotas and licences.
South African mines plan to expand platinum output to meet growing demand, with top producer Anglo American Platinum expected to boost the group’s output capacity to around 3.5 million ounces by the end of 2006 from two million in 1999.
But it is unclear how much PGMs Russia can supply in the coming years, since production and inventory figures remain a state secret. Fears are also mounting that Russia’s palladium stockpile may run out in a few years since much of its export supply during the past several years has been drawn out of its stock, traders said.
With Russia’s sole palladium producer Norilsk Nickel expected to produce less than 100 tonnes annually, palladium supply will not be able to satisfy demand unless Russia sells a substantial chunk from its dwindling stockpile, traders said.
