Russia’s Norilsk Nickel (Nornickel), the world’s largest producer of palladium and high-grade nickel, expects the palladium market to continue to be in a deficit of about 500 000 oz this year, driven by the continuing increase in loadings in autocatalysts.
Underpinning the company’s market forecast for palladium is the rolling out of the China 6 vehicle emissions standard and the introduction of real driving emissions (RDE) tests in Europe to measure pollutants.
The miner states that palladium’s substitution with platinum will be limited in 2020, as an “effective technical solution is not available”.
“We do not anticipate any major palladium substitution with platinum in the near term, owing to the technological challenges related with the differences in certain chemical properties of the two metals, making them not fully interchangeable in the modern autocatalysts.
“According to our industry knowledge, currently, automakers have a little appetite for changes in the catalysts chemistry as their engineering resources are focused on meeting new, tighter emission legislation and RDE testing, and they do not have enough resources to conduct new catalyst formulation testing,” says Nornickel.
CEO of South Africa-based major Sibanye-Stillwater, which mines gold and platinum group metals (PGMs), Neal Froneman, suggested last week that substitution might be much closer than many thought. He stated that it was incumbent on the end-users to help PGM mining companies to a position where the platinum price would not be destroyed.
Palladium’s premium to platinum ranged $400/oz to $1 000/oz in 2019, but widened to as much as $1 700/oz this month.
Last year, the palladium market was in a deficit of 550 000 oz, Nornickel states, adding that industrial consumption increased by 5% year-on-year, or by 440 000 oz, to 11.5-million ounces, driven by robust demand from the automotive industry.
Nornickel is forecasting industrial consumption to increase by 100 000 oz in 2020, as growing automotive demand (300 000 oz) will be offset by substitution taking place in more price sensitive industries, such as jewellery, dental and electronics.
The palladium price reached almost $2 800/oz in February.
“In spite of a downward revision of global car sales forecasts by 3% to 5%, we estimate palladium loadings in light-duty petrol (gasoline) vehicles to increase by about 5% to 7% year-on-year following the nationwide adaptation of China 6 emission standard and introduction of RDE tests for European automakers.”
In 2019, primary palladium supply increased 6% year-on-year to 7.3-million ounces driven mainly by the release of work-in-progress inventory by Nornickel and South African producers. Recycled volumes increased 11% to 3.5-million ounces with processing capacities being fully used.
This year, Nornickel is forecasting primary supply to decrease by 2% to 7.1-million ounces, owing to lower output in Russia and South Africa, following last year’s strong production volumes.