Pricing for PGMs hits roadblock

Demand and pricing for the platinum group metals (PGMs) palladium and rhodium have hit a roadblock in the form of declining auto sales because of the COVID-19 pandemic. The two metals are commonly used in manufacturing catalytic converters for vehicles with gasoline engines.

According to MarketWatch, palladium futures prices turned negative for the year in late April as prices settled at $1,892.20 per ounce April 22, down 0.9 percent from the end of 2019. The record settlement price of $2,711.70 was reached Feb. 27, when prices traded more than 42 percent higher for the year. Rhodium spot prices on April 23 stood at $8,200 per ounce, according to data from Johnson Matthey, having gained nearly 36 percent year to date. However, they had reached a record price of $13,800 as recently as March 12, the news outlet reports.

Platinum is more commonly used to control emissions from diesel engines, which have lost favor in many countries that have introduced tougher emissions standards. That metal’s futures settled at $788 per ounce, a 19 percent decline for the year.

ALG, Inc., a subsidiary of TrueCar Inc., Santa Monica, California, projects U.S. total new vehicle sales will reach 638,092 units in April, down 54 percent from a year ago when adjusted for the same number of selling days. This month’s seasonally adjusted annualized rate (SAAR) for total light-vehicle sales is an estimated 7.7 million units. Excluding fleet sales, ALG expects U.S. retail deliveries of new cars and light trucks to be 577,280 units, a decrease of 49 percent from a year ago when adjusted for the same number of selling days.

Marnie Owen, New York City-based global head of technical analysis at Informa Global Markets, tells MarketWatch that three-way catalytic converters, which address hydrocarbon, carbon monoxide and nitrogen oxides in gasoline-powered vehicles, “use more rhodium, which had boosted its demand in the face of declining auto sales even prior to COVID-19.”

Palladium is likely to rebound as China’s clean air standards lead to “more palladium into every tailpipe in that country,” R. Michael Jones, chief executive officer of Vancouver-based Platinum Group Metals, tells MarketWatch.

Ed Egilinsky, head of alternatives at New York City-based Direxion, tells MarketWatch that a shutdown of production in some areas related to COVID-19 has offered some support to palladium and rhodium prices.

Autocatalyst recycling is the second largest contributor to the world’s supply of PGMs, according to Cliff Hope of PMR Inc. who wrote the article “PGMs retain their sheen” for the January issue of Recycling Today. Hope, using Johnson Matthey’s supply-and-demand figures for the last six years, writes that autocatalyst recycling has contributed on average 23 percent of the world’s PGMs supply. Recycling of jewelry and electrical sources brings recycled PGMs’ contribution to world supply to just slightly more than 25 percent.