Many market watchers are concerned about falling platinum demand, but according to the World Platinum Investment Council (WPIC), those worries may be overstated.
In a report released earlier this week, the WPIC looks at two main assumptions: the idea that European diesel car sales will continue to fall steeply, and the notion that platinum loadings on European diesel vehicles are likely to decline.
Addressing the first point, the WPIC explains that while European diesel vehicle sales have indeed been falling, that drop may not continue. Essentially, says the WPIC, while gas, hybrid and electric vehicles are becoming more popular, they also face emissions challenges, and in the short term they are not likely to be sold in high enough numbers to totally push diesel aside. The organization believes that if the industry “adopts independent emissions testing, and this is impactful … diesel share could be beneficially ‘higher for longer.'”
Already there has been some progress with independent emissions standards in Europe. PSA Group, the second-largest car manufacturer in Europe, has partnered with non-governmental organizations to publish independently reviewed emissions data for its top-selling vehicles. In its 2016 Corporate Social Responsibility Report, the auto manufacturer says it installed portable emissions measurement systems on 40 of its mid-range vehicles to collect emissions data; the data was then checked by independent entity Bureau Veritas.
Automakers have attempted to become more transparent after Volkswagen (OTCMKTS:VLKAY) fitted its Audi cars with software allowing the vehicles to cheat on their emissions tests. In 2015, The Guardian revealed that vehicles from Mercedes-Benz, Honda (NYSE:HMC), Mazda (TSE:7261) and Mitsubishi (NYSE:MTU) also emitted more nitrogen oxide on the road than in regulatory tests.
In terms of the second point, the WPIC notes that the reason people think platinum loadings on European diesel vehicles are going to fall is that technology is shifting from LNT to SCR. However, according to the WPIC, “platinum loadings in both technologies are likely to increase to comply with Euro 6c [emissions standards].” As a result, even with the shift, average platinum loadings on diesel vehicles should rise.
While the WPIC’s report focuses on how European vehicle sales could impact platinum demand, there are also concerns about auto markets in other parts of the world. The report follows the news that General Motors (NYSE:GM), the number-one US automaker, has lowered its forecast for car sales in 2017. CFO Chuck Stevens made the comment during a conference call with analysts on Monday (June 26), according to Forbes. Additionally, the latest monthly auto sales data from China and the US indicates that fewer vehicles are being sold in those countries.
Overall, however, the WPIC believes that downside risks to platinum automotive demand are overestimated, while risks of supply declines are underestimated. The organization also believes that there are other reasons to consider platinum a sound investment, including strong ETF holdings.
Platinum company news
This week, Group Ten Metals (TSXV:PGE) entered into an agreement to acquire a 100-percent interest in the Stillwater West platinum-palladium project in Montana. Meanwhile, Wellgreen Platinum (TSX:WG) released an updated resource estimate for its nickel-PGMs-copper project in the Yukon.
As of Wednesday (June 28), platinum was trading at $924.70 per ounce, down from $928 on June 22. Palladium is expected to outprice platinum and is currently trading at $865 per ounce, down from $889 on June 22.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.