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Ardent Listener
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 Posted - 01/25/2011 : 19:23:24
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By Richard Bloch
Two recent articles on palladium and platinum discuss the usage of these metals as autocatalysts for reducing pollution.
Sean Daly’s article on palladium suggests that growth in the automotive sector could be bullish for palladium. According to Avery Goodman, however, “in most cases, palladium is a far inferior substitute” for platinum.
In my own article on palladium back in December, I noted the distinction between gasoline engines and diesel engines. While technologies were developed to make palladium an acceptable substitute for platinum in gasoline engines, it hasn’t been practical for diesel engines.
But that may be changing. In my article I cited a report report by Stillwater Mining (SWC), one of North America’s largest palladium miners:
By late 2009 technology had emerged reportedly allowing palladium to displace up to 50% of the platinum loadings in diesel catalytic converters, and with the technology in hand, movement toward 50% palladium loadings is now underway.
This is a significant development considering over 50% of new European-built cars are diesel and considering diesel catalytic converters require two times more PGMs than equivalent gasoline engines.
I’m not expert enough in the technical details of using palladium vs. platinum in diesel engines to suggest which works best, but from what I gather, the lower sulfur content in today’s diesel fuels allows for a bump up in the use of palladium. This report, "Palladium Use in Diesel Oxidation Catalysts," from Johnson Matthey seems to provide a good overview.
I’m assuming that the incentive to find ways to substitute palladium for platinum has largely been based on price, with palladium being less expensive than platinum.
Except it’s not that much less expensive anymore. Here’s a chart showing platinum and palladium pricing over the past two years (for reference, I also added the price of gold):
And here’s a chart shows the ratios of palladium against both platinum and gold:
About two years ago – just before the stock market bottomed out – an ounce of platinum was more than five times the price of an ounce of palladium. Now it’s only about 2.3 times as expensive.
As for gold, back in in January 2009, it took nearly five ounces of palladium to “buy” one ounce of gold. Now it only takes 1.7 ounces of palladium to get that one ounce of gold.
So if palladium has an advantage over platinum because of its lower price, what price would it have to rise to before platinum becomes the more viable alternative for diesel, or even gasoline engines?
According to Johnson Matthey analyst Alison Cowley in this MiningWeekly article:
If the price of palladium were to rise so high that it was challenging platinum, there is certainly potential for platinum to move back into gasoline autocatalysts. That could happen at any time, because platinum was originally a gasoline catalyst.
Unfortunately, Alison did not provide any specific price parameters, but in the article (from November), Alison seemed to think that the six-month range for the metal wouldn’t exceed $850 per ounce. If that’s the case, there may not be much upside from here – at least in the short term.
There are a few ETFs for investing in these metals. ETF Securities offers both a Physical Platinum Shares (PPLT) and Physical Palladium Shares (PALL) ETF. If you can’t decide, they also offer a Physical White Metals ETF (WITE) which offers exposure to both (and which also includes silver).
Just one question: Why do they call them “white metals”? They look more like gray to me.
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Platinum vs. Palladium: Which Autocatalyst Is Bett
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