Substitution and platinum automotive demand growth
Demand, supply and the associated cost of purchasing PGMs for autocatalysts also impact usage. For example, the spike in the price of palladium in 2000, at a time when more palladium was being used annually in vehicles than was being mined, resulted in platinum substituting palladium.
Notwithstanding the economic disruption caused by the COVID-19 pandemic, the PGM market today ─ and indeed from 2017 since when the price of palladium has exceeded that of platinum ─ is experiencing a similar imbalance, with annual automotive palladium demand exceeding mined supply and sustained palladium deficits being seen. This has led to a distortion between the price of platinum and palladium, with the latter currently trading at a price premium of over US$1,000/oz.
The high price, sustained demand growth and limited supply growth of palladium is making material platinum demand growth due to substitution of some palladium in gasoline cars extremely likely, as the recent BASF and Johnson Matthey announcements demonstrate.