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Autocatalyst demand for palladium to reach record level

1st February 2013

By: Samantha Herbst

Creamer Media Deputy Editor

  

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Platinum researcher Johnson Matthey has forecast that palladium demand will benefit from growth in global vehicle production, with strong performance expected in Japan and the US (principally gasoline markets) and that the substitution of platinum in diesel aftertreatment formulations will continue.

“We are expecting to see a 2012 record high for palladium sales in the autocatalyst sector, with demand rising to 6.5-million ounces, which is a 7% increase on 2011. In fact, gross demand for palladium in autocatalysts is forecast to be higher than primary mine supply,” says Johnson Matthey principal analyst Alison Cowley.

The forecasts, contained in the company’s ‘Platinum 2012 Interim Review’, published in November, will, however, not be confirmed until Johnson Matthey publishes its main review in May, which will then provide a definitive record of platinum-group metals supply and demand for 2012.

Cowley explains that the predicted high demand is based on strong increases in the production of gasoline vehicles worldwide and in the increased use of palladium for emissions control in diesel vehicles.

“It’s only in Europe, really, where we expect to see a decline in palladium buying for 2012,” she adds.

Johnson Matthey forecasts a small contraction in palladium demand in Europe, whereas growth is expected in Japan, owing to the recovery of vehicle manufacturing.

Gross demand for palladium in 2012 is set to be the highest in North America where vehicle production, driven by double-digit sales increases and pent-up consumer demand, is forecast to rise at a rate of 14%, up by 2 000 oz, says Cowley.

“This is more than twice the growth rate in China which, until recently, was the world’s fastest-growing car market.”

Cowley does, however, state that vehicle production in China accelerated in 2012, though it is still lagging behind historical numbers in the Chinese market.

“Of course, the market is bigger now, so although production growth in China may not be as dramatic as it was four years ago, there are still a significant number of additional vehicles being produced.”

Palladium demand has benefited particularly from a rebound in 2012 at plants in North America and China, and from Japanese manu- facturers’ output in Japan, reports Cowley.

“Demand will be supported by the rest of the world, with strong growth in output in Mexico and Russia,” she adds.

Meanwhile, palladium supplies are predicted to decline by 11% to 6.57-million ounces, which is a nine-year low for this sector.

“The biggest reasons for this are falling supply from South Africa and falling stocks from Russia, with big increases in demand in autocatalysts and investment,” says Cowley, who adds that Russian stock sales were last at such a low level in 2003.

Similarly, South African supplies have also reached levels similar to those seen in 2003 partly owing to last year’s safety stoppages and wage disputes.

Johnson Matthey forecasts that sales of Russian State stocks will decrease by more than 500 000 oz, compared with 2011, with falling average grades in Russia expected to result in a decrease in newly refined palladium output.

Johnson Matthey is forecasting a 1% decline in platinum demand in the autocatalyst sector to just below 3.1-million ounces, as a result of a softening light-duty diesel market, primarily in Europe.

“We expect that buying by the European autocatalyst sector will decline by 14%. This is related to the weak economic growth in that region, recession in some countries and an associated decline in vehicle production,” says Johnson Matthey publications manager Jonathan Butler.

He adds that the decline in the share of light-duty diesel vehicles in the 2012 financial year dropped to below 50% of the market share for the first time in several years.

“We have also seen weakness in some of the previously strong light-duty diesel markets, such as France and Italy, where there were double-digit declines in vehicle production in the first nine months of 2012.”

Offsetting the eurozone weakness, however, is growth in Japanese production, which bounced back after the earthquake in 2011.

“We have also seen strong growth in India, which continues to have an increasingly affluent population desirous of vehicles, in particular, which is driving platinum demand for use in oxidation catalysts,” says Butler.

He adds that 40% of the light-duty market in India is now diesel and Johnson Matthey expects to see further strength in this market going forward.

“Overall, things are not looking quite as bad as the negative headlines from Europe suggest,” concludes Butler.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online

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