The recent pickup in motor vehicle manufacturing in North America, Japan, India and China has triggered expanded output of catalytic converters worldwide and pushed spot and futures prices of palladium and platinum to two-year highs. Bloomberg calls it "a sign that the global economic recovery may be gaining momentum."
Reuters says some automakers are using more palladium in converters for their diesel and gasoline engines because the price was much cheaper than platinum.
Palladium has sold at an average $500/troy ounce in the spot market this week, its strongest price since March 2008. Palladium futures for June delivery, the active month on the New York Mercantile Exchange, have been as high as $508/oz. The first quarter average for palladium was $442/oz.
Spot platinum is selling around $1,704/oz this week, the highest since August, 2008. July platinum has settled around $1,710. The first quarter average for platinum was $1,564/oz.
Platinum and palladium prices had dropped by almost two-thirds when the global financial crisis turned into the 2008-2009 recession. Sharp inflows into the first U.S. platinum and palladium exchange-traded funds, or EFTs, and optimism about the auto industry's recovery have spurred buying an d rising prices of these metals, says precious metals analyst Carlos Sanchez at commodities consultancy CPM Group in New York.
Also, "the recovery in the auto sector, particularly in the very strong developing markets such as China, has led to a pick-up in demand," says Sanchez. "Our strongest conviction is for a rebound of auto-related platinum-group metals demand as worldwide vehicle production rises, forcing a restocking of the metals inventories run down in 2009," reckons former Mitsui analyst Edel Tully, now chief metals strategist at UBS Securities office in London.
Jonathan Barratt of Commodity Broking Services in Sydney agrees that "good economic numbers should be quite positive purely for the supply-demand forecast for catalytic converters, so the economic updraft is there."
