Autocatalyst demand up despite high platinum price

By Frank Tang and Kevin Krolicki - Analysis

NEW YORK/DETROIT (Reuters) - The high price of platinum should not hamper demand from automakers for platinum group metals used to make catalytic converters because of tightening global emission rules and a lack of alternatives.

Meanwhile, the embattled U.S. auto industry has been trying to keep production costs steady by hedging a long position in PGMs as well as other rising metals such as steel and aluminium.

Even though it was clear that lofty platinum prices were putting downward pressure on autocatalyst demand, the global car industry was still required to meet government emission standards, said Jeffrey Christian, managing director of commodities research firm CPM Group in New York.

"The best available technology is PGMs-based autocatalyst. So, if they want to sell cars, they are going to have those autocatalyst on there," Christian said.

Indeed, platinum demand for auto catalytic converters in North America surged 32 percent to 930,000 ounces in 2007 due to tighter emission laws to medium- and heavy-duty diesel trucks, platinum specialist Johnson Matthey said in an industry report on Monday.

However, the switch to palladium-based catalyst formulations from platinum-based ones in the gasoline sector also accelerated in 2007 due to the high price of platinum, Johnson Matthey said.

"They can try to reduce their PGM loading, or try to make the shift between platinum and palladium, but there is only so much you can do," Christian said.

Platinum and palladium are employed in varying amounts in autocatalysts to filter out carbon monoxide and particulate emissions. While palladium is more efficient in gas engines, platinum is primarily used in diesel vehicles.