Would the new tri-metal catalytic converter innovation raise Platinum prices?

Here’s BASF’s new innovation for catalytic converter industry:

BASF, a 156-year-old German Giant in chemicals, consumer and industrial solutions, announced in March 2020 their invention of tri-metal catalytic converter. It is reported that the approach would likely substitute between 20% and 50% of the high-valued palladium currently used with lower-valued platinum. This invention is applicable for light-duty gasoline vehicles only so far. With this, about 300,000 ounces of palladium in auto catalyst production could switch to platinum.

The benefits of the Tri-Metal Catalytic converter include:

  • Bringing down the cost of manufacturing catalytic converter for automakers.
  • Partially regulating the consumer price of new automobiles that still comply to the China, India and Europe emission control regulations.
  • Mitigating the detrimental strain from structural deficits ensuring longevity and sustainability of PGM market especially in South Africa.
  • Indirectly reducing the demand for conventional mining for palladium, which is environmentally harmful. Time to take better care of our delicate Gaia!

Impact on platinum prices:

With this invention going into mass production by BASF, it may potentially raise the price of platinum and reduce the price hike in palladium.

This is because the innovation can make the world-wide shortage of highly-coveted palladium more manageable when mass production kicks in. As of time of this article, palladium price per gram is USD 73.50 and platinum price per gram is USD 38.42. Rhodium is used in smaller amounts in catalytic converters.

However, in the short term say for 2021 or 2022, this invention may not effect platinum and palladium prices. However, the effect on platinum or palladium prices by the tri-metal catalyst after 2022 remains to be seen. If there is really going to an effect, there is a chance that it will be a gradual increase.

Why is there shortage of palladium then?

In recent times, slightly more palladium is produced than platinum. However, generally, demand for palladium from the automotive industry is about three times more than the demand for platinum. Uses of palladium also includes dental crown fillings and jewellery. So if you happened to have bought a palladium ring or necklace 5 years ago, this article may be an exciting read for you for the day.

BBC reported in 2020 that the amount of palladium produced globally in 2019 is projected to be below global demand for the eighth year in a row.

The recent high demand for palladium in the automotive industry are mainly due to:

  • The catalytic converters in petrol and hybrid vehicles generally requires more palladium than those in diesel vehicles.
  • The diesel emissions test scandal in Europe in 2015, where cheating devices were used to pass performance and test for diesel vehicles. This repelled consumers towards petrol vehicles. This was a factor for petrol and hybrid vehicles to be more in demand from then on.
  • Tightening gas emissions regulations in Europe and China to combat exhaust air pollution.

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