Fears of falling platinum demand after the United States accused the German firm of using software for diesel cars that deceives regulators measuring toxic emissions pushed prices for the metal to a 6-1/2 year low of $925.30 an ounce on Wednesday. The company recently said it would fire 119 employees after failing to negotiate a new contract with miners. The average diesel auto contains 4 to 6 grams of platinum, A-1 Specialized Services & Supplies Inc. estimates.
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At stake in Europe is about 1.7 million ounces of annual demand for platinum in diesel autocatalysts, which equates to nearly a quarter of world consumption previous year, according to Reuters’ calculations.
Najm is also trying to sell a Volkswagen SUV not affected by the recall, but is still anxious its value will also be hammered by the negative publicity.
If regulators uncover widespread violations across the industry and environmentally-conscious drivers in Europe switch to gasoline, it could “reshape the picture” for platinum, said Erica Rannestad, senior analyst, precious metals demand at GFMS.
Platinum prices snapped a four-day bear run yesterday as prices seemed to find some near-term support just above $931/oz after losing over 5% since the start of the week. Palladium is used in emissions control systems in gasoline-powered vehicles, and sales of those are expected to rise as consumers shy away from diesel cars.
It is still early days in the scandal, and could ultimately buoy platinum group metals demand if carmakers ramp up efforts to curb emissions.
About 17,000 ounces of platinum are used for 100,000 diesel-fuelled cars.
“There are many possibilities about how this could play out”, Rannestad said, citing the chance that carmakers may redesign engines, which could increase PGM loadings in autocatalysts.
“It is likely that the divergence between platinum and palladium prices in the near-term will continue as long as more details about this scandal are released”, Boele said.
Volkswagen AG and its American division was sued Thursday on behalf of San Diego-area consumers who allege the automaker misled buyers by cheating on air pollution tests for its “clean diesel” line of vehicles.
Platinum prices saw their biggest price drop since June 2013, when precious metals fell victim to the “taper tantrum” unleashed by former Federal Reserve chairman Ben Bernanke.
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