Following the Russian invasion of Ukraine, global automakers are accelerating efforts to use less palladium and more platinum due to supply worries from Russia, said the World Platinum Investment Council (WPIC) on Monday.
In order to save money, automakers have begun shifting to platinum, which is cheaper than palladium. A faster transition would increase the demand for platinum and could lift prices while having the opposite effect on palladium.
Incidentally, Russia accounts for nearly 25-30% of the world’s supply of palladium and 8-10% for platinum.
“The substitution effort has gone up hugely,” said Trevor Raymond, WPIC’s head of research. “The amount of savings an automaker can make are massive. What’s been added on top of that is concerns about availability (of palladium).”
At around $950 an ounce, platinum costs around half as much as palladium. Automakers use around 2.5-3 million ounces of platinum every year and around 8.5 million ounces of palladium.
In its latest quarterly report, the WPIC said the roughly 8 million ounce a year platinum market would be oversupplied by 627,000 ounces this year following a surplus of 1.13 million ounces in 2021.
During the January-March quarter, the demand for platinum fell by 26%year-on-year even as supply fell by 13%, leaving the market oversupplied by 167,000 ounces, said the WPIC.
It went on to add, for the full year, supply would be 5% less than in 2021 while demand would increase by 2% more compared to the previous year.