Palladium's surge to a record has intensified talk among analysts that carmakers will look to replace it with cheaper platinum for use in pollution-control devices. The auto industry's answer: Not so fast.
Palladium, mainly used to control smog from gasoline engines, is trading near the highest relative to platinum since 2001 as consumers move away from diesel vehicles, where platinum is more widely used. Tensions between the U.S. and Russia, a top supplier, and forecasts for shortages are also lifting palladium. Platinum fell to an almost 10-year low in August.
Still, while carmakers can substitute palladium with platinum, retooling factories is expensive and the metal makes up a relatively small part of their costs.
"It's not a flick of a switch for us," Rahul Mital, global technical specialist, diesel aftertreatment at General Motors, said in a panel discussion at a London Bullion Market Association meeting in Boston on Monday. "Any time you want to make a substitution like that, it is at least 18 months to a two-year cycle if we're going to switch. We have to be careful that by the time we do all that," price changes don't negate the benefits, he said.
"If palladium pressure continues, you will see those results."
