The rising price of platinum, used in catalytic converters, reportedly threatens to squeeze already thin margins of US automakers and may prompt them to increase use of cheaper palladium.
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Reuters said higher platinum prices come at a time when General Motors and are struggling with soaring health care and raw material costs and declines in US market share.
High platinum prices have probably added US$20 to $40 to the cost of a car, slicing into auto manufacturers’ margins, Jeffery Christian, managing director of precious metals and commodities consulting firm CPM Group, told Reuters.
New York platinum futures rose over $1,000 an ounce on Tuesday after Monday’s peak at $1,011, the highest price since March 1980, the news agency noted – in contrast palladium was around $263 an ounce on Tuesday.
Citing chemical and refining company Johnson Matthey, Reuters said the purchase of platinum by automakers worldwide is expected to increase by 8% to a record 3.86 million ounces in 2005, fuelled by Europe’s growing light-duty diesel vehicle sales.
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By GlobalDataIndustry demand in North America should edge up by 20,000 ounces, or 2.5%, to 820,000 ounces in 2005, due in part to retrofitting of catalysts to heavy-duty diesels in the United States, according to Johnson Matthey.
GM and Chrysler Group reportedly declined to discuss any financial impact from platinum prices, but told Reuters they have the flexibility to change the percentage of precious metals used in autocatalysts.
“These (autocatalysts) are engineered as such that we can switch either metal out,” GM spokesman Tom Hill told the news agency. “So when there is a spike in the market what we would do, if we needed to mitigate that, we would use the metal that is not priced as high.”
Hill reportedly said GM could make such an adjustment during the course of a day.
Reuters noted that Ford, which took a $1 billion pretax charge in the fourth quarter of 2001 for a loss in value of its stockpiled palladium that had been purchased in the event of any shortage, declined to comment on any impact from higher prices.
Chrysler spokesman Markus Mainka reportedly said its use of platinum may be down slightly this year compared to 2004 while palladium usage is likely to go up this year.
Mainka, who declined to say how much platinum or palladium Chrysler buys, told Reuters the company typically has long-term contracts for buying precious metals that shield it from volatile spot prices.
However, CPM Group’s Christian said that such contracts do not completely insulate automakers. “Long-term contracts say that they will pay the monthly average,” he added.
