Since PGMs are a necessary component of catalytic converters, pricing trends can sometimes be traced back to activity in the auto industry. Catalytic converters in every vehicle use PGMs as catalysts, which convert (hence, the name) the toxic substances from engine exhaust into inert or less toxic substances. This produces a cleaner exhaust that conforms to emission standards. Catalytic converters can use a number of different catalysts, but the most popular for automobiles are platinum and palladium.
Naturally, a greater demand for automobiles can directly increase the demand for PGMs. Earlier this year, CPM Group released a report predicting that global demand for palladium in automobiles would rise nearly 3% in 2016. Main factors contributing to the prediction included:
• growing Chinese demand for small cars, due to new tax breaks for buyers
• lower oil prices spurring U.S. demand
• a steady demand for autos in Europe, combined with stricter emission standards
Although we can’t speak to the auto industry’s actual performance for 2016, the increased demand for palladium is obvious if you review the prices over the last 6 months. But with electric vehicles continuing to grow in popularity and decrease in price, it remains to be seen whether this correlation between palladium prices and the auto industry will last through 2017 and beyond.