Low price spurs palladium outlook

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G. Chandrashekhar

Mumbai, Jan. 17

DEVELOPMENTS in the automotive industry can change the price relationship in the platinum group metals. Palladium may no longer be in the dumps, while the high-flying platinum market may be in for a correction.

The price difference between platinum and palladium has been over $700 an ounce for some time now. If developments in the automotive industry are any indication, demand for palladium would soon expand, with positive effect on prices.

Currently, platinum is ruling above $1,000 an ounce, while palladium is range-bound at $270-280.

There is tremendous fund enthusiasm in platinum aided by sharp price spike in gold. These high prices have, however, deterred physical consumers of platinum.

Overall, the outlook for platinum group metals demand from the automotive sector is good.

Increasing automotive production especially in emerging markets is set to push the demand for autocatalysts further.

It is widely expected that there will be a slight shift from gasoline to diesel cars.

Autocatalysts constitute the main demand source for both platinum and palladium as the demand for systems that clean the exhaust fumes has increased on the back of tighter environment restrictions.

The two propulsion systems in use by the automotive industry (gasoline and diesel) have different characteristics. These have direct implication for the type of catalyst used.

While gasoline engines use a three-way catalyst, diesel engines employ a different emission control system based on diesel oxidation catalyst (DOC).

Gasoline catalysts usually contain a mixture of both platinum and palladium, while DOC has in the past been platinum-based.

In a major development, DOC can now employ palladium. In this new type of catalyst, palladium can substitute up to a quarter of platinum.

In other words, it is possible for a switch from expensive platinum to cheaper palladium.

Given the possibility to substitute between the two metals to some extent and against the background of high platinum prices, the outlook for palladium demand is much better, said Macquarie Research, adding that where possible, platinum will be substituted with palladium in both three-way catalysts and DOC.

(This article was published in the Business Line print edition dated January 18, 2006)
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