Summary
Major softening in demand for automotive emission catalysts has kept Platinum prices at levels half of record peaks. New CAFE and CO2 regulations may boost catalyst needs but overall vehicle builds may trump the demand curve.
Analysis
With automotive Platinum demand off over 8% last year, the first decline in almost a decade, mine production cutbacks may have poised the commodity for future supply constraints again. With Obama's 35 mpg CAFE/CO2 objective now set for 2016, renewed focus on diesel engines may help drive Pt demand higher. Diesels enjoy a 20% - 30% fuel efficiency advantage and a 15% - 20% CO2 reduction vs. gasoline powertrains. Demand for Pt in diesel emissions systems is typically higher than comparable gasoline engines due to limited opportunities for Pd and Rh usage. With OEM stockpiles at modest levels due to financial pressures spot demand will certainly spike at the first sign of vehicle build recovery. Off-highway diesel emissions standards phasing in from 2010-2015 will also add momentum to future Pt demand and help drive spot prices back toward prior levels. Short term prospects remain limited due to depressed vehicle builds but the longer term outlook remains positive for PGM commodities.
