In the world of the Platinum Group Metals (PGMs), no other industrial application is as important as the catalytic converter. While platinum has been the dominant material used in these products since the 1970s, US car manufacturers started moving towards palladium in the latter parts of the last decade due to lower costs and better performance. The rest of the world uses primarily platinum however, as the majority of vehicles outside of the United States rely on diesel engines, for which platinum had a virtual monopoly. New technology is attempting to weaken the platinum/diesel bond, and give palladium a boost in sales.
Diesel engines operate at lower temperatures than unleaded gasoline engines. While palladium performs better at these higher temperatures, platinum is the metal of choice for lower temperature environments. In addition, the damaging sulfur content of diesel emissions tends to collect more on the palladium catalyst, decreasing its performance.
For years, auto catalyst manufacturers tried desperately to find a substitute for platinum, to no avail. But in 2005, several companies announced products that use a combination of platinum and palladium for its chemical conversions. These products were able to substitute around 1/3 of the platinum used in the machine with palladium. While certainly not creating a paradigm shift in the industry, the invention of this converter was a boost to palladium sales.
Today, these converters are starting to gain some popularity in Europe. Nevertheless, the common acceptance of this new machine is unlikely to cause huge shifts in demand for either palladium or platinum. If new advances were to be achieved, however, radical shifts could certainly occur. Investors in the PGMs should keep a keen eye on such developments.
Platinum and palladium are the mostly sensitive precious metals to business cycles. With the automobile industry suffering, a near term drop in both of these metals is likely. Since this sector dominates the PGM demand, a hiccup in automobile sales is likely to cause serious pressure on the prices of both palladium and platinum. The Commodity Investor is currently issuing a sell on both commodities.
by The Commodity Investor
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