As emission regulations tighten, demand for platinum and palladium in the automotive industry rises.

According to Trevor Raymond, director of market research at (WPIC), the world platinum investment association, the demand for platinum in the automotive industry is expected to increase by 25% over 2020 to nearly 3 million ounces in 2021. This is due to the entry into force of Euro 6d and China's 6a emission regulations, which apply to all vehicles in Europe and China, respectively.

This year alone, this will affect about 31 million passenger vehicles and light commercial vehicles, as the two emission regulations are stricter than before.

Raymond explained to Engineering News and Mining Weekly (Engineering News & Mining Weekly) that global emission standards have continued to tighten since platinum-based automated catalysts were first introduced in the 1970s to reduce harmful emissions from vehicles.

"the use of platinum and other platinum group metals (PGMs) as catalysts for emission control systems has created a new major market, which has greatly increased the demand for platinum group metals in the automotive industry, which remains the biggest demand driver for platinum today."

Demand for platinum in the auto industry is expected to be nearly 3 million ounces in 2021, 3 per cent higher than before the outbreak. In May, WPIC predicted that demand for platinum in the auto industry would increase by 25 per cent in 2021 compared with 2020, based on an expected 16 per cent increase in light vehicle production in 2020.

"the increase in demand for platinum in the automotive industry is mainly due to the fact that car sales are much higher than in 2020, and the 16% increase reflects that car production and sales are recovering from the negative impact of the epidemic," Raymond explained.

Car production and sales have not yet returned to pre-epidemic levels, but demand for platinum in the auto industry in 2021 is expected to exceed 2019 levels. Raymond pointed out that this is due to three factors: 1. The platinum load of each vehicle is increased to meet the new and lower emission standards, which is mainly applicable to European passenger diesel vehicles and Chinese heavy vehicles; 2. Sales of diesel mild hybrids and plug-in mild hybrids have increased in Europe as automakers increase sales of low-carbon dioxide vehicles to reduce potential carbon dioxide fines; 3. The huge premium of palladium to platinum has driven demand for 1:1 platinum to replace palladium in gasoline car catalysts since 2018.

The current forecast for platinum demand in the automotive industry in 2021 is based on global production of 86.5 million light vehicles, which is about 1.1 million lower than the forecast released in March due to a global shortage of semiconductor auto parts.

Raymond believes that the shortage of semiconductor parts may last longer than originally expected, but its impact on platinum will be much smaller than that on palladium, which is mainly used as a catalyst for gasoline cars produced around the world.

At the same time, details of the heavy vehicle market have not been publicly disclosed, but there are expected to be about 4 million, depending on whether strong sales in 2020 will be repeated in 2021, driven by Chinese government-led incentives.

"the new, lower emission standards are unlikely to have an impact on the production and sales of light or heavy vehicles, as the implementation date was well known before the outbreak," Raymond said.

However, the key to predicting a strong recovery in demand lies in the impact of stricter emissions regulations, particularly in Europe and China. WPIC said this was "driving an increase in platinum loads in light and heavy vehicles".

Raymond explained that this is due to the current standard restrictions on emissions regulations in Europe and China.

At present, road testing of nitrogen oxide emissions is mandatory in Europe, and in order to achieve this goal, each vehicle needs more platinum group metal load. By September 2019, many new Euro 6 standard diesel vehicles still emit more than 800 mg / km of nitrogen oxides.

"reducing NOx emissions from more than 800mg / km to about 20mg / km is an extremely difficult technical challenge, which is a stronger indication that, in essence, each vehicle needs to use more platinum," Raymond said.

Historically, emissions levels in China have generally been higher than those in Europe and the US because the average platinum group metal load per vehicle is much lower. However, Raymond points out that China 6's emission limits are more stringent than current European and North American standards, which requires more than 40 per cent more platinum group metals per vehicle.

Low emission requirements

WPIC said that supporting the automotive industry's forecast for platinum demand growth in 2021 is based on the implementation of China's national 6 emission standards for heavy vehicles. Zhuang Xin Wanfeng (Johnson Matthey), a UK multinational chemicals and sustainable technology company, predicts that the load of platinum group metals that meet the requirements of China's country 6 will be about three times higher than that of China's country 5, with platinum accounting for most of the growth, according to WPIC.

China country 6 (for heavy vehicles) will enter into force on July 1, 2021. However, Raymond points out that China has a "long" history of voluntarily launching vehicles that meet lower emission standards before the enforcement date.

Because of the epidemic, this specific implementation time has been postponed from January 2021.

However, Raymond said most manufacturers had introduced new emissions controls by January this year.

"the increase in platinum use will be the result of all heavy vehicles meeting emission standards for the whole of 2021 or at least six months," he commented. "

For example, the country 6 standard for light vehicles is divided into two levels: country 6a and country 6b, the latter of which is more stringent. The implementation date of country 6b is relatively late and includes road tests.

Several Chinese automakers have chosen to comply with China's 6b regulations before the 6a implementation date to avoid having to solve the two restrictions one after another.

However, the increase in demand for platinum in the car industry this year will be largely due to the recovery of global car production and sales from the negative impact of the epidemic.

In addition, China's positive impact on platinum demand (the increase in platinum in heavy vehicles, plus platinum and palladium replacement) is greater than in other markets, Raymond said.

China is the largest user of platinum in the world, and the Chinese government regards platinum as a metal of strategic importance. Like lithium, nickel and cobalt, platinum is specifically mentioned in the Development Plan for New Energy vehicle Industry (2021-2035) issued by the State Council of China, encouraging Chinese companies to increase production capacity to ensure the long-term supply of these rare and demanding metals.

The importance of platinum and platinum group metals to China's economy was more widely emphasized at the first Shanghai Platinum week, held from May 31 to June 4; there has been a great interest in platinum and platinum group metals both inside and outside the value chain of the automobile industry.

The Shanghai Platinum week is based on London Platinum week and is held against the backdrop of global economic turmoil caused by the epidemic.

Platinum and palladium replacement increases platinum demand?

At the same time, in addition to the rising load of platinum group metals, another driver is driving growing demand for platinum in the automotive industry-platinum and palladium replacement.

WPIC explained that because of the price difference between palladium and platinum, platinum is increasingly used as an alternative to the more expensive palladium in gasoline engine emission control systems, taking into account that one gram of platinum provides almost the same catalytic effect as one gram of palladium.

Increasingly stringent regulations have also played an important role, with all light gasoline vehicles sold in Europe and China required to meet new, lower emission standards since January.

"in general, it is the responsibility of policy makers and regulators to ensure that good air quality is provided to their citizens, and emissions are reduced over time as technology advances," Raymond explained.

Platinum and platinum group metals are central to achieving this goal, which, he noted, includes converting carbon monoxide into carbon dioxide, reducing unburned hydrocarbons and reducing nitrogen oxides.

Support climate change legislation related to vehicle emissions aimed at reducing carbon dioxide emissions. Diesel engines can still achieve lower carbon dioxide emissions because of their superior fuel efficiency, "Raymond told Engineering News and Mining Weekly. In particular, mild hybrid diesel vehicles emit 30 per cent less carbon dioxide than conventional gasoline-powered cars.

He added that it "seems unlikely" that transport will shift from internal combustion engines to 100% electric in the next 10 or 15 years, and that a possible compromise is that, with the transition, regulators will include petrol-diesel hybrids, heralding platinum as a more cost-effective alternative to palladium.

"this will ensure that the exhaust pipes of internal combustion engines are as carbon efficient as possible," Raymond said.

In addition, the impact of Euro 6d and country 6 regulations led to a significant increase in palladium loading of gasoline vehicles produced in these areas, which exacerbated the shortage in the palladium market, which was in deficit for the ninth year in a row in 2020.

According to WPIC, this in turn causes palladium to be much more expensive than platinum, stimulating platinum and palladium replacement in terms of cost. The maximum discount for platinum to palladium was $1060 an ounce in 2019 and soared to $1903 an ounce by 2020.

"as a result, the replacement of platinum for palladium has accelerated further, although the replacement of existing models is likely to be a slow and less economically attractive process," WPIC said. "

Some industry participants now predict that up to 1.5 million ounces of additional platinum will be used each year to replace palladium currently used in passenger cars and minivans by 2025, ensuring that their emissions are met before the new regulations are implemented. the replacement is most likely to begin in the North American market.