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(Part Two, see Part One here)

Automotive Industry

In contrast to the WPIC expecting the demand in the automobile industry to fall by 14%, Johnson Matthey believes the impact will be more severe as the EU’s diesel segment - the platinum sector’s sensitive area - will suffer more than gasoline vehicle sales in Asia. As a result, the demand for platinum required for autocatalysts will show a 21% decline this year, Johnson Matthey predicts, while palladium and rhodium will show a 15% decline.

The demand for the PGM is decreasing due to the limited sales of new vehicles caused by the increased average length of vehicle ownership (a similar phenomenon was observed during the 2008 financial crisis), says Nornickel.   

In the first quarter of 2020, the global car production and sales fell by 25% and 20%, respectively, compared to the last year figures. The demand for platinum fell by 17% year-on-year in January-March to 634,000 oz as the plant closures due to COVID-19 made the car output plummet, while uncertainty over the future and caution in spending contributed to an unprecedented drop in sales.

Johnson Matthey explains that the temporary closures of automakers will hit the production in the first half of the year, and the consumers’ appetite for high-end purchases is likely to remain low in the rest of the year.

Basically, the decline is a direct result of the pandemic, but even before the COVID-19, the market was far from its optimal state. For example, while North America saw growth at the beginning of the year, the sales in the EU fell as new CO2 emissions standards for vehicles were introduced. In China, after lifting the quarantine in mid-February, only part of the auto factories have reopened, immediately experiencing a shortage of labour and components; as a result, by April, the car production recovered only by 75% compared to the pre-crisis level.

Since April, however, the industry in China has been gaining momentum, with auto retail showing signs of a V-shaped recovery. For example, truck sales in China rose by 52% in April making the 4-month figures even higher than a year ago. Bank of America draws attention to a recovery in sales in China and high platinum and palladium imports to that country. The bank also notes that social distancing measures have hit the public transport all over the world, but have highlighted the importance of a private car.

In the EU countries where the virus came later, the April figures were depressing. In Germany, the car sales were by 60% below the 2019 level and in countries such as the UK, Italy and Spain, they stopped almost completely. In North America, the sales fell by 50%.

The overall picture and forecasts are disappointing, although at the moment the extreme scenario assuming a 34% drop in the car sales to 60 mn cars looks dubious. For the year as a whole, a decline of 20% is expected (this forecast is given by Johnson Matthey and Bank of America), to 71 mn cars.


The WPIC expects that tightening the emissions regulations could spur the demand for platinum in the second half of the year. If the global indicator is negative, China that returned to normal life earlier than anyone else will show a 14% growth in the demand in 2020, which is explained by the implementation of the China VI standard for heavy vehicles associated with an increase in the platinum content in autocatalysts. The Moody's rating agency also considers China as the only major automotive market where the decline in sales in 2020 will not exceed 10% and the signals of a demand recovery are seen. At the same time, the global sales will fall by 20%, the sales in the EU will decline by 30%, in the US - by 25%.

There are also hopes for an increase in demand in India where the Bharat VI emission standards have been introduced since April despite a national lockdown. While India does indeed switch to the Euro 6 analogue launching sales of respective fuel and new vehicles adapted for it, China is facing the problems. Last year, 16 provinces in China switched to the China VI standard, which accounted for 70% of the country's vehicle production. But with the outbreak of the pandemic, Beijing eased its restrictions in the rest of the provinces that were supposed to switch to new regulations this year. In the regions that account for 30% of the vehicle production, vehicles with the China V standard are allowed for sales until January 1, 2021, which will make it possible to sell their inventories estimated at 1 mn vehicles (slightly less than the total vehicle output in China in March this year). The Chinese authorities have also extended subsidies for electric vehicles without autocatalysts until 2022. “It is likely that financial stress due to the COVID-19 crisis will motivate car companies to take a fresh look at opportunities to reduce the cost of their exhaust aftertreatment systems, especially in China,” Johnson Matthey warns.

Renaissance Capital also predicts a potential delay in the adoption of stricter emission regulations, that is, a threat to the most important driver of the increased PGM content in autocatalysts.

Johnson Matthey writes that in the EU, the implementation of the new Euro 6d standard is still scheduled for July 2021, but automakers are looking more closely at the potential savings on the PGM if it can be done without compromising the compliance with the maximum permissible emissions.


The most obvious way to save money is replacing expensive palladium with platinum. In March, the BASF company, Germany, announced the development of a new technology that would partially replace palladium with platinum in gasoline catalysts, while allowing it to meet stringent emission standards. Another technology announced by market players from South Africa is being tested with the aim to be used in off-the-road vehicles and trucks, Nornickel said. Based on the test results, it can be applied from 2023-2024 and lead to the replacement of up to 30% of palladium with platinum in catalysts. Nevertheless, Nornickel believes that the manufacturers of spare parts are unlikely to be guided by one technical solution. Replacing palladium with cheaper platinum in autocatalysts remains difficult to implement due to the different properties of these metals, which makes the process expensive and time-consuming and, therefore, it is an unlikely scenario in the near future. According to analysts interviewed by the FT, the replacement is likely to take time and the automakers will be reluctant to spend money on this while they focus on the switch to battery-powered electric vehicles (BEVs).

But won't the penetration of the BEVs undermine the PGM’s investment attractiveness that has been supported by the role of these metals in the global auto industry over the past few years? Although the trend towards an increase in the electric vehicle share is obvious, it is too early to talk about a quick replacement. Last year, the BEV production in China fell by 4% to 1.2 mn ones, and “It led the market to realise that the ambitious plan of the Chinese government to have 2 mln EVs in 2020 would not be fulfilled, and ICE would still remain the preferred option for the months to come,” stated Nornickel. According to another major manufacturer, Amplats, despite the development of the BEVs that will occupy up to 20% of the market, the production of the traditional ICE vehicles and hybrids will grow until 2030.

Strategically, the decline in the traditional vehicle share gives more prospects than risks for platinum, manufacturers think. In addition to the BEVs, another sustainable type of transport is gaining momentum - fuel cell vehicles (FCEVs). The proton-exchange fuel cells are used both in vehicles and in stationary power plants. The largest auto groups such as Toyota, Daimler, Hyundai have started selling fuel cell passenger vehicles, and the production of fuel cell buses is developing in China, Nornickel notes. Several cities in the PRC declared themselves the ‘hydrogen energy’ cities and introduced special measures to support hydrogen-fueled transport and power generation based on the hydrogen fuel. Toyota introduced the first potentially mass-produced hydrogen fuel cell electric car, Mirai, which generated electricity for itself, unlike the battery electric vehicles.

The fuel cell vehicles, like fully battery electric vehicles, have zero pollutant emissions when used. However, unlike the fully electric vehicles, the FCEVs have a significant range (500 km or more) and quick refueling. The use of platinum in the FCEV, as well as the anticipated increase in the number of vehicles using fuel cell technology, will increase the demand for platinum in the automotive industry. This innovative technology uses a platinum catalyst in a fuel cell (about 0.5 to 0.6 g of platinum per kW) and works exclusively on hydrogen, discharging only water from the tailpipe. A small truck uses a 30 kW fuel cell, while the Toyota Mirai uses a 114 kW fuel cell. Thus, hydrogen vehicles use almost twice the amount of platinum than autocatalysts in combustion vehicles, and even a small-scale entry of the FCEVs into the market can significantly influence the demand for platinum, Amplats expects.

The plans to increase the number of fuel cell vehicles were announced in Japan, the PRC authorities plan to increase the number of such vehicles up to 50,000 by 2025 and 1 million by 2030. The total number of such vehicles in the world in this case will be 2 million, or 5% of the global automotive market. In 2018, the platinum consumption in this industry amounted to about 1.5 tonnes. Considering that currently each fuel cell contains about 20 g of platinum, this industry can become one of the key consumers of the metal in the next 5 to 10 years, says Nornickel.

Even amid the pandemic, the FCEVs may receive a boost in China where they have been granted renewed subsidies for electric vehicles under a new subsidy scheme for the replacement of old vehicles, Johnson Matthey says in his report. The subsidies for eco-friendly vehicles were supposed to be canceled in 2020, but were extended for another 2 years.

Amplats also expects the platinum demand will be spurred by Chinese subsidies for the FCEVs, which are more suitable for large and long-haul vehicles such as trucks and automobiles. This will translate into an additional demand for about 750,000 oz of platinum, even if China achieves only half of its declared FCEV guidance, and the current precious metal contents will decline, says Amplats CEO Chris Griffith. Over the past decade, Beijing has spent about $58.3 bn to support the electric vehicle industry through developing the largest market as well as dominating the global supply chain. The authorities are now focusing on fuel cell technology with the aim to catch up with Japan and Korea where Toyota and Hyundai introduced their hydrogen-fueled vehicles. “The solution to the pollution problems will come from a number of different areas. Battery and fuel cells can happily coexist alongside each other, and will be incentivised by the government for different reasons,” says Griffith. 

Igor Leikin for Rough&Polished