A bird's eye-view on automotive demand and PGMs

The PGM segment congregated in London this week for the annual LPPM Platinum Week. With deteriorating diesel share in Western Europe continuing to weigh heavily on the fundamental outlook for platinum, the mood was understandably subdued.

Platinum loadings in Europe are falling.  Not only is diesel share shrinking but the phase-in of Euro 6d-TEMP complaint vehicles (which began in September 2017) has solidified a shift from the platinum-rich lean NOx traps (LNTs) to selective catalytic reduction (SCR) technology.

While SCRs still need to be used in conjunction with a platinum-containing catalyst, the overall loadings are lower with Johnson Matthey estimating a 4% drop in average PGM loadings in European diesel cars this year.

Furthermore, as the phase-in period continues (all passenger cars sold in Europe from September 2019 will have to be Euro 6dTEMP compliant) this trend towards lower loadings should roll over to next year as well.

Platinum substitution in gasoline vehicles remained a major discussion point but isn’t being reflected in the numbers yet. With palladium largely trading above platinum since last October and Johnson Matthey estimating that platinum accounts for only 3% of total PGM use in gasoline catalysts, the potential for substitution is clear (refer above chart).

However, after this week we are less inclined to factor in meaningful substitution over the medium-term. Certification lead times, volatility in prices, and, most importantly, necessary improvements in technology to match the effectiveness of palladium-rhodium catalysts given gasoline exhaust temperatures will likely keep substitution restrained. Courtesy: JPM

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