When the rubber hits the road, catalytic
converter consumption-and, by extension, platinum group metals
use-hinges on the ability of automakers to show that production
numbers are rebounding.
The bad news is that auto demand, especially
in the developed world, is expected to be down again this year.
But once things do improve, platinum group metals use could
accelerate quickly as many of the major automakers have been
actively destocking precious metals during the past six
Automotive catalytic converter manufacturers
provide the principal demand for platinum group metals (PGMs)
each year, accounting for some 60 percent of available platinum
and palladium and as much as 85 percent of rhodium
Kim Korth, president of Grand Rapids,
Mich.-based consultant IRN Inc., expects the first-quarter
seasonally adjusted annual rate of production in the United
States to be in a range of 10.5 million to 11 million vehicles.
A bad year for U.S. auto production is considered to be 12
million to 12.5 million vehicles and a good year 16 million
units, she said.
J.D. Power & Associates, Westlake
Village, Calif., forecasts light vehicle sales in Western
Europe will fall 10 to 11 percent in 2009 due to difficult
economic conditions, expensive financing and sullied consumer
confidence. "While mature markets are being impacted more
severely than emerging markets, no country or region is
completely immune to the turmoil," said Jeff Schuster, J.D.
Power's executive director of automotive forecasting.
China's automobile sales totaled 9.38 million
vehicles last year, a 6.7-percent increase from 2007, according
to the country's Ministry of Commerce and the China Association
of Automobile Manufacturers (CAAM). The 2008 sales growth rate
was the slowest in the past decade, but CAAM is still
forecasting growth of around 5 percent in 2009.
"The outlook for car sales is difficult to
forecast, but demand is expected to weaken in Asia and remain
depressed in North America and Europe," according to
London-based metals refiner Johnson Matthey Plc. "As a
consequence, global car production in the first quarter of 2009
could be 25 percent below last year."
But several other analysts said the downturn
in the automotive sector has already been factored into
platinum group metal prices. Platinum group metals were "way
oversold" in late 2008 because investors were assuming a
sustained "doomsday scenario," analysts at New York-based
JPMorgan Chase & Co. said.
A consistent uptrend in PGM prices and demand
will be predicated only on positive growth prospects for the
global economy and a consequent rise in auto sales, said
Patrick Magilligan, a precious metals analyst at recycler A-1
Specialized Services & Supplies Inc., Croydon, Pa. "The
collapse in vehicle sales, particularly in the larger,
developed markets, has eliminated a sizable portion of demand
for these metals, a situation which is not likely to improve in
the foreseeable future," he said.
PGM prices are expected to remain depressed
at or near current levels at least through the first half of
2009, Magilligan said, but added that at the first sign of a
recovery in the auto market speculative interest likely will
take prices higher.
"A perfect storm of minimal consumer
inventories, reduced availability of both primary and secondary
supplies, a potentially weaker dollar and growing investment
interest could spur prices for PGMs rapidly once any indication
of a turnaround in the auto sector is noted," Magilligan added.