Palladium leads vehicle catalyst charge in 2019

Palladium leads vehicle catalyst charge in 2019

While palladium demand and pricing rise, the diesel car sector’s struggles have tempered demand for platinum, Becky Berube of United Catalyst Corp. writes.

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February 19, 2019

Looking back is always easier than looking forward. Last year was a good year for auto catalyst recycling, and for 2019 the outlook remains positive.

The strong demand for automotive catalysts, increased vehicle recycling and a short supply continues to push the palladium price higher. Lower demand caused by the decrease of diesel vehicle sales in Europe, combined with an increase of secondary supply from recycling, continues to hold the platinum price down. Stricter emission standards will increase rhodium loadings, but that metal will still be in surplus.

The demand for new automobile catalyst climbed to record levels last year amidst a shortage of palladium (Pd), a surplus of platinum (Pt) and an increasing supply of rhodium (Rh). Palladium makes up most of the precious metals contained in auto catalyst or catalytic converters.

This is good news for palladium since palladium loadings have been increasing, mostly in the United States market, in auto catalysts since the 1990s. At that time the palladium technology was less advanced and the fuels less clean, which means more palladium was added than platinum removed. At the same time, palladium was historically less than half the price of platinum.

Johnson Matthey in its PGM Market Report dated Feb. 13, says the secondary supply of palladium grew by 10 percent in 2018, after having a 20 percent gain in 2017. This was caused by the increase in vehicle recycling once the scrap steel price bounced back from its lows in 2015 and 2016.

And considering “dieselgate,” Germany’s car emissions fraud scandal, there have been stricter vehicle testing procedures and tighter emission limits on heavy-duty vehicles. This contributes to higher demand for automotive catalysts and use of platinum group metals (PGMs), namely Pt, Pd and Rh.

Even with the decreased use of platinum in three-way catalyst over the past 20 years, and the reduction of diesel catalyst production (which uses more platinum), a small rise in increased demand for platinum will come from fuel cell technology in automotive applications and stationary power generation over the next several years.

As emission standards tighten in most countries, rhodium loadings also increase. Still, this metal is expected to continue to be in surplus.

Recently, I asked Philip Newman, the director of Metals Focus, a London-based precious metals consultancy group, to comment on the outlook for platinum and palladium in 2019. Here is what Philip had to say.

“Platinum has fallen to a record discount to gold of $526. That said, Metals Focus still expects platinum prices to eventually firm this year, especially toward the end of 2019. However, this is premised on our view of a stronger gold price. In other words, platinum will continue to face headwinds of unsupportive supply and demand.

“In trying to gauge professional investor sentiment in recent weeks, the absence of up-to-date CFTC (Commodity Futures Trading Commission) data has led us to review New York Mercantile Exchange open interest. Having fallen for much of January, open interest has since risen through to mid-February. In our view, subdued weak institutional sentiment toward platinum indicates that the rise in open interest represents an increase in gross short positions.

“Palladium has continued to strengthen this year, achieving a new record high of $1,439 on Jan. 17. Key to this is the ongoing physical deficit in the palladium market, which this year is expected by Metals Focus to reach 1 million ounces.

“Looking ahead, we believe palladium prices will continue to rise this year. Even so, palladium’s record high prices increase the risk of near-term profit taking, although any downturn in the palladium price should be short-lived.”

In summary, 2018 was a great year for both vehicle and auto catalyst recycling. At this time, 2019 looks to be more of the same. This is why we, at United Catalyst Corp., believe that recyclers can get the most from their converters with the scientific process of selling converters on assay.

The author is the president of Greenville, South Carolina-based United Catalyst Corp. She also serves as co-chair of the Automotive Recyclers Association (ARA) Annual Convention Educational Programming Committee and is an Executive Committee member of the IPMI (International Precious Metals Institute). She can be contacted at berube@unitedcatalystcorporation.comFor questions about selling converters on assay, please contact her at berube@unitedcatalystcorporation.com or go to www.unitedcatalystcorporation.com.