"In fact, 2021 could see the highest automotive platinum demand since 2018, notwithstanding the expectation that light-duty vehicle production will be some 1.1 million units below pre-pandemic levels and heavy-duty production will fall by 1% when compared to 2020," it said.
The WPIC said the key to strong platinum demand recovery was tightening emissions legislation, especially in Europe and China, which was "driving higher platinum loadings across both light and heavy-duty vehicles". Platinum has been predominantly used for emissions control in diesel vehicles.
It said emissions regulations had led to significantly higher palladium loadings on the vehicles produced in those regions, which was exacerbating palladium shortages and pushing the price up.
Platinum's price difference to more expensive sister metal palladium, which reached a record high yesterday, was accelerating the substitution of platinum for palladium in gasoline systems, the council said.
"One gram of platinum provides almost the same catalytic effect as one gram of palladium," it noted.
It acknowledged substitution on existing vehicle models could be a slow, less economically attractive process.
"Nevertheless, some industry participants now project that, by 2025, as much as 1.5Moz of additional platinum will be used annually to replace palladium in car and van models whose first release predates the requirement to meet new emissions legislation, most likely in the North American market," it said.
Substitution on new vehicle models "could well have taken place with almost no additional engineering, testing or certification costs," it believed.
With China and Europe expected to produce about 32 million light-duty gasoline vehicles this year, already developed to meet new standards, the council said it was possible those regions alone could see platinum substituting over 400,000oz of palladium in 2021.
The price difference between the two metals, which had ballooned to $1,903/oz in 2020, has narrowed but palladium remains more than double platinum's price on the spot market.
Palladium has increased 50% over the past year to US$2,786/oz.
The platinum price has also risen, up 61% over 12 months, and is at $1,207/oz.
