Autocats take up PGM slack from jewellery in China

26th March 2004 By: candice haase

The rapid growth of the automotive market in China, coupled with increasing emission-control regulations, places the market for catalysts in that country as a rapidly-growing consumer of platinum-group metals (PGMs).

Johnson Matthey market research and planning director Mike Steel informs Mining Weekly that, by 2008, the produc- tion of light-duty vehicles, including cars and light-duty trucks, is expected to reach about 7,4-million units a year.

He estimates that about 70% of the light-duty vehicles in China currently have catalysts to meet emission standards equivalent to Euro Stage I requirements.

These standards regulate the emission of carbon monoxide, hydrocarbons and the oxides of nitrogen from vehicles. The introduction of emission standards, such as the US Clean Air Act Amendment of 1970, and the evolution of these regulations, continues to influence the varying pattern of use of platinum, palladium and rhodium on autocatalysts.

Euro Stage II standards were introduced to Beijing and Shanghai in January and March last year respectively.

Nationwide compliance to these standards is scheduled for July this year.

“As a result of tax incentives, many vehicles already comply with the tighter limits,” Steel comments.

The introduction of Euro Stage III compliance requirements in Beijing and Shanghai in 2005/6, followed by the rest of China in 2008, will see over 90% of light-duty vehicles incorporating catalysts, the platinum-market analyst predicts.

“To meet Euro Stage III standards, catalysts will be loaded more heavily with PGM than at present,” Steel comments.

However, the amount of platinum used in autocatalysts is nowhere near that consumed in jewellery manufacture, Impala Platinum manager of strategy and business development Bob Gilmour comments.

“Platinum use in the Chinese catalyst market last year was in the region of 100 000 ounces,” he informs. That said, however, Gilmour notes that the impact of a high platinum price on the jewellery market will become apparent towards mid-year when manufacturers will have to enter the market to buy metal to replenish retail stocks.

In November last year, Johnson Matthey estimated that the demand for platinum in jewellery manufacturing in China would fall from 1,48-million ounces in 2002 to 1,2-million ounces in 2003.

“As for the current year, it is true that the high prices seen for platinum recently have begun to have a negative effect,” Steel notes. He adds that, if the high prices continue, the market this year is expected to fall back even further.

“We predict the demand for platinum jewellery coming down a further 10% in the Chinese jewellery market,” Gilmour comments. However, private consumers still seem to be eager to buy platinum jewellery.

“The problem is that the profit margins for manufacturers and retailers have been squeezed as metal prices have risen faster than increases in retail selling prices,” Steel explains.

Only once retailers have adjusted their prices to enable the industry to continue making adequate profits will industry analysts be able to assess the effect high metal prices may have on jewellery demand.