Automakers Increase Efforts to Substitute Palladium with Cheaper Platinum

Following Russia’s invasion of Ukraine and the subsequent Western sanctions have created concerns for the supply of palladium, automakers are accelerating efforts to use less palladium and more platinum. A large surplus in the platinum market is expected this year.

Automakers have already been shifting to platinum as it’s cheaper than palladium. An increased effort of transition could increase demand and prices for platinum while having the opposite effect for palladium.

Russia accounts for around 25-30% of the world’s supply of palladium and around 8-10% of its platinum.

While palladium trade from Russia has not yet been affected by sanctions, buyers worry that more companies could boycott Russia and government could impose restrictions.

The automakers’ efforts to substitute palladium with platinum has accelerated sharply, as the amount of savings are big. The buyers are also concerned about the availability of supply of palladium.

At around $950 an ounce, platinum costs around half as much as palladium. Automakers use around 2.5-3 million ounces of platinum each year and around 8.5 million ounces of palladium.

The trend is expected to cause the roughly 8 million ounce a year platinum market would be oversupplied by 627,000 ounces this year following a surplus of 1.13 million ounces in 2021.

During the 2022 first quarter, platinum demand fell 26% year-on-year and supply fell 13%, leaving the market oversupplied by 167,000 ounces.

For the full year, supply would be 5% less than in 2021 and demand would be 2% greater, with auto industry demand rising 16% due to an increase in light duty vehicle production, higher loadings per vehicle to meet tighter emissions regulation and substitution from palladium.

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