Multidisciplinary research team Afriforesight expects future platinum demand to rely heavily on the successful uptake of fuel cells, as well as petrol autocatalyst manufacturers switching from palladium-based to platinum-based coatings.

Afriforesight chief chrome and platinum-group metals (PGMs) market analyst Ayanda Makupula, explains that this switch is due to increasingly negative sentiment towards diesel vehicles, as demonstrated by last month’s German High Court ruling which acknowledged that German cities had the right to ban diesel vehicles from their streets.

Makupula notes that, while the platinum price dipped in the days following the ruling, it was more of a knee-jerk reaction and the price recovered slightly, owing to US President Donald Trump’s tweets on trade wars: “Platinum, like gold, has a safe-haven status, meaning that any geopolitical strife and uncertainty see investors flocking to gold and platinum shares or products. “Platinum should now have even more appeal to some investors, owing to its relatively low price.”

He adds that platinum’s industrial, investment and jewellery applications are expected to carry the platinum price until the changes for automotive platinum demand gain traction.

Makupula says, for the short term, he does not expect drastic changes from vehicle owners or manufacturers, and that the phasing out of diesel cars will continue to take place gradually. “Diesel car sales have been on a gradual decline since the 2015 Volswagen (VW) emissions scandal.”

However, he notes that the fact that Germany (alone) has about 15-million diesel cars on its roads and that the car manufacturing industry wields considerable political clout mean that a compromise has to be reached between banning diesel cars entirely and reducing emissions. “Of the 15-million cars, about 3-million are equipped with Euro-6 technology.” This implies that 12-million cars would either have to be scrapped (which is unfeasible) or upgraded.

Makupula notes that the German government met shortly after the ruling to interrogate the viability of a retrofit programme for older diesel models – a medium-term solution.

However, two weeks ago, Reuters reported that VW CE Matthias Mueller had voiced misgivings over such a programme at an event on March 16. Muller noted that hardware changes would cost between €1 500 and €7 000 per car. He added that VW could not shoulder the costs for such modifications. “ [As] we had to pay about $25-billion in America, we cannot again pay $17-billion for hardware refits.”

Makupula believes that some sort of resolution between the German government and the automotive manufacturers will be reached, or that the cities will compromise and institute levies rather than bans, adding that “the court noted that a ban should be the last resort”

Nonetheless, he points out the developments in Germany are only a microcosm of the changing attitudes toward diesel and that platinum demand for the manufacture of diesel autocatalysts will continue to decline, having already declined by 2.8% in 2017.

Thus, he expects the demand and price for platinum to take hard hits, while palladium will gain in value and volumes. “These movements could reverse over the medium term as some automakers opt to replace palladium with the now cheaper platinum.”

He says that platinum is much more versatile than palladium and can easily be substituted for palladium, as it was used in petrol autocatalysts prior to 2000, when the platinum price skyrocketed.

Between January 15 and March 15, the palladium price averaged about $1 030/oz, while platinum averaged about $970/oz. “If the palladium price continues to strengthen, autocatalyst manufacturers may switch to platinum to improve their margins.”

Makupula expects manufacturers to make the switch gradually, with “platinum taking up 1% to 2% of palladium autocatalyst demand each year”. Rhodium replacement with platinum is another avenue that could be explored by manufacturers as a means of cutting costs, since rhodium is currently double the price of platinum.

He comments that Afriforesight expects global car sales to increase, and that an increasing portion of sales will be for petrol cars

In terms of PGM demand, the organisation expects palladium and rhodium demand to increase in the short term, “with platinum demand remaining relatively soft during this period, . . . but platinum will regain some of its former glory, as we expect fuel cells to drive demand as a result of stricter emissions laws, and Asia (including China, Japan and South Korea) fast-tracking the uptake of fuel cells”