Sat, Dec 29, 2018 - Page 10 News List

Hybrid vehicle boom set to boost use of palladium

Bloomberg

Palladium, this year’s hottest metal, is used mainly to cut pollution from gasoline engines. Yet anyone betting that the rise of electric vehicles will curb demand anytime soon is likely to be disappointed, the metal’s top producer said.

Hybrid-electric vehicles, which also require precious metals to control pollution, represent a growing percentage of future demand, said Anton Berlin, head of analysis and market development at Norilsk Nickel PJSC.

The Russian miner forecasts that combined palladium use in hybrid and plug-in hybrid — or rechargeable — vehicles next year is likely to be nearly triple that of 2016.

Norilsk is not the only one forecasting hybrid growth, at least in the medium term.

While the projected increase in electric vehicles is significant, “it doesn’t compare” to the kind of expansion expected in hybrid electrics, JPMorgan Chase & Co said in a report in October.

Hybrids are forecast to grow from just 3 percent of global market share in 2016 to 23 percent of sales by 2025, it said.

Palladium has gained 19 percent this year and set successive records this month to at times surpass gold as the most valuable major metal.

Demand is projected to exceed supply for the seventh straight year this year.

There is some expectation that the rising cost of palladium might prompt automakers to look for ways to use more of its sister metal, platinum, which is used widely in diesel engines.

However, Berlin said he does not expect much substitution any time soon.

The shift takes time and might not be economically viable, he said.

Some analysts are also forecasting a decline in palladium prices next year.

The positive demand outlook is already reflected in the price, which has overshot, said Georgette Boele, coordinator of FX and precious metals strategy at ABN Amro Bank NV.

Still, the demand outlook remains rosy. The number of vehicles carrying a platinum-group-metal-containing (PGM) catalyst is likely to grow from almost 76 million to almost 90 million in 2025, Julius Baer Group Ltd commodity strategist Carsten Menke said.

“PGM demand in general and palladium demand in particular should continue to grow over the next six years,” Menke said.

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