The outlook for platinum and palladium is likely to remain bullish in 2021 after a rally in 2020 that was boosted by the prospect of a faster than expected recovery for global growth and for global vehicle sales. Platinum should benefit most from the rebound in vehicle sales and from the increased demand for Jewelry across the world as the global economy rebounds and pent-up demand is released.
Platinum and Palladium are key components in the catalytic converters used to reduce the CO2 emissions released by thermic vehicles. Against a backdrop of strong price momentum for the metals in 2020, there has been increased report of used catalytic converters being stolen in order to extract the precious metals from them.
Platinum prices have continued to edge higher in 2021 with supply being constrained in the short term despite ambitious investment plans by the industry major miners, South African pure players Sibanye Stillwater and Impala Platinum, alongside the more diversified mining giant, Anglo American.
European, Chinese and US push toward more aggressive climate change policies are likely to put additional pressures on the global automotive industry. This has been materalized by an Executive order issued by US President Joseph Biden and by an upward revision in the social cost of carbon – a key gauge used by Federal administrations for assessing the environmental sustainability of many projects. In April, the upcoming new interim EPA regulations on cars emissions are likely to reverse Trump’s policies, leveraging on the voluntary emissions reduction agreement reached in 2019 by California State with the major auto makers. Going forward, new regulations across the G20 will translate into even tougher emissions caps for the period after 2025-2026.
Palladium vs. Platinum
Since 2008, palladium prices have been on an upward secular trend against platinum prices (cf. the chart above). The main reason behind this relative appreciation trend has been the shift of automakers away from platinum – which at its peak in early 2008 became twice as expensive as gold and four times as expensive as palladium – in favour of palladium. But this trend is now reverting as palladium prices have literally gone through the roof starting from 2019, on the back of growing supply deficit. Indeed, while the annual production is roughly the same, the current demand for palladium from the automotive catalytic converter industry is about three times more than the demand for platinum.
In June 2020, the german chemicals conglomerate BASF announced that, in collaboration with Sibanye-Stillwater and Impala Platinum, it has successfully developed and tested an innovative Tri-Metal Catalyst technology that enables partial substitution of high-priced palladium with lower-priced platinum in light-duty gasoline vehicles without compromising emissions standards. Therefore, we could expect platinum prices to continue to appreciate against palladium.
