Russia Risks Accelerating Automakers’ Shift from Palladium to Platinum, WPIC Reports

LONDON (Reuters) – Automakers are ramping up their efforts to rely less on palladium and more on platinum amid concerns over palladium supply disruptions from Russia, according to the World Platinum Investment Council (WPIC). The organization has forecast a significant surplus in the platinum market for this year.

As automakers switch to platinum, which is more affordable than palladium, there is anticipation that demand for platinum will increase, potentially raising its prices while putting downward pressure on palladium prices.

Russia currently supplies approximately 25-30% of the world’s palladium and about 8-10% of its platinum. Although Russian exports haven’t faced significant restrictions from sanctions implemented after its military actions in Ukraine, ongoing conflict could lead more companies to avoid Russian metal, and governments could introduce further limitations.

Trevor Raymond, the WPIC’s head of research, noted, "The drive to substitute has greatly increased. Automakers can achieve substantial savings, and there are growing concerns regarding the availability of palladium."

Currently, platinum is priced around $950 an ounce, making it roughly half the cost of palladium. Annually, automakers utilize about 2.5-3 million ounces of platinum compared to around 8.5 million ounces of palladium.

The WPIC’s recent quarterly report indicated that the platinum market, which produces about 8 million ounces yearly, is expected to see a surplus of 627,000 ounces in 2022, following a surplus of 1.13 million ounces in 2021. In March, the WPIC had projected a surplus of 652,000 ounces for the current year.

In the first quarter of 2022, demand for platinum fell by 26% compared to the same period last year, while supply decreased by 13%, resulting in an oversupply of 167,000 ounces. For the entire year, supply is expected to be 5% lower than in 2021, while demand is projected to increase by 2%. A notable rise in automotive demand of 16% is anticipated due to higher light-duty vehicle production, increased platinum loadings per vehicle, and a shift away from palladium.

Here are the supply and demand figures for platinum:

Annual Platinum Supply/Demand (‘000 oz)

• 2021
  • Supply: 8,156
  • Demand: 7,029
  • Market Balance: 1,128
• 2022 Forecast
  • Supply: 7,781
  • Demand: 7,155
  • Market Balance: 627

Quarterly Platinum Supply/Demand (‘000 oz)

• Q1 2021
  • Total Supply: 1,953
  • Total Demand: 2,069
  • Market Balance: -116
• Q1 2022
  • Total Supply: 1,695
  • Total Demand: 1,528
  • Market Balance: 167

The information reflects the developing dynamics of the platinum and palladium markets amid broader economic considerations and geopolitical tensions.