Factory shutdowns in China due to COVID-19 reduced HDV production in February by 51 per cent when compared to the same month in 2019. At the time, this led to market commentators forecasting double digit contractions in production for the whole of 2020. However, so far this has not proved to be the case at all. Cumulatively, Chinese HDV production from January to May 2020 was almost 8 per cent higher than in 2019. Should HDV production in China remain at least at 2019 levels for the rest of the year, this - together with actual sales achieved until the end of May - will increase platinum demand in 2020.
Elsewhere, the case for substitution, whereby palladium used in autocatalysts on primarily gasoline, but also diesel, vehicles is replaced by less expensive platinum, has been strengthened by the economic impact of the pandemic. COVID-19 associated disruption costs, combined with sales losses, could further incentivise automakers to accelerate substitution in order to save money – with cost savings of up to US$ 140 per vehicle (at current prices) possible.
The extent of such substitution currently underway is not public data due to its proprietary nature, but if only 5 per cent of all palladium used in autocatalysts was replaced by platinum on the one to one basis necessary to achieve the same emissions control, this would equate to additional platinum demand of over 450 koz each year.