Platinum, used in the production of catalytic converters, crashed this week to the lowest price in six-and-a-half years on the back of Volkswagen’s pollution-cheating scandal.
The precious metal, which has also been weakened in recent months by worries linked to a flagging global economy, plunged on Wednesday to US$926.35 per ounce — the lowest level since January 2009. German carmaker Volkswagen (VW) faces a US criminal investigation and worldwide legal action after admitting on Tuesday that as many as 11 million of its diesel cars are equipped with devices capable of cheating emissions tests.
The scandal forced VW chief executive Martin Winterkorn to resign over the software that covertly turns on pollution controls when the car is being tested, and off when it is being driven.
The furor sent prices sliding as investors fret over reduced consumer confidence in diesel cars that mainly use platinum in their catalytic converters.
“Prices for the metal ... came under substantial pressure this week, as investors continued to experience the fallout from Volkswagen’s emission scandal,” Sucden analyst Kash Kamal said.
“Alleged attempts to rig US pollution tests have already damaged the automaker’s reputation and any decision among consumers to shift away from diesel engines could put platinum prices under further pressure,” he added.
Platinum is mainly used for industrial purposes and about half of global demand stems from the production of catalytic converters for diesel cars.
Volkswagen is the world’s largest auto manufacturer by sales in the first half of this year, with car brands including Audi, VW, Seat and Skoda.
The price of sister metal palladium — used in gasoline-powered vehicles — climbed as a result of the Volkswagen affair. In Friday trade, palladium briefly spiked to US$677.80 per ounce, a high point last seen on July 7.
“Consumers may shift to gasoline cars — where mainly palladium is used in catalytic converters in engines,” ABN Amro precious metals analyst Georgette Boele said.
Despite a supply deficit in the platinum market, prices have plunged by about 23 percent since the start of this year, weighed down by concerns over the world economy, particularly China.
Analysts warn that platinum and palladium could diverge even further in the coming weeks and months.
“It is likely that the divergence between platinum and palladium prices in the near term will continue as long as more details about this scandal are released,” Boele said.
On the London Platinum and Palladium Market, platinum prices fell to US$945 an ounce at Friday’s fixing, compared with US$988 an ounce a week earlier.
Palladium dropped to US$611 an ounce from US$672.
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