Platinum Demand Gains as Washington Slows the Electric Vehicle Push

The auto sector accounts for between 37 and 40 percent of global platinum demand, making it the single largest element of the market. That share has been given fresh support by the rollback of vehicle electrification under the White House administration, which has kept internal combustion engine sales running at a pace that surprised parts of the market. Platinum catalyst demand is therefore firmer in the United States than most forecasts allowed for at the start of the year, and European sales are holding up better than the region’s economy would suggest. The offset sits in China, where an auto contraction and a jewelry inventory unwind are working against the strength elsewhere.

Rhona O’Connell is StoneX Head of Market Analysis for EMEA and Asia, and has tracked commodity markets for more than four decades, with precious metals and the platinum group metals at the center of that coverage. Her work spans the mining sector, physical broking and the investment markets, the three vantage points from which the flow of platinum into and out of emission control catalysts is visible.

Key Themes

• The auto sector takes between 37 and 40 percent of platinum demand globally.
• Platinum and palladium sit in combustion engine catalysts and have no role in electric vehicles.
• China accounts for almost all of the contraction expected in global auto demand this year.

Platinum Demand Tracks Combustion Engines Rather Than Electric Vehicles

Platinum demand in the auto sector rests on a technical fact rather than a sentiment shift, and the policy reversal on electrification has made that fact load-bearing again. Platinum and palladium are both used in the emission control catalysts fitted to exhaust systems, and O’Connell is direct about where that leaves the electric fleet, noting that “they’re not used in the electric vehicles, but they are used in the internal combustion engine”. The White House rollback of electrification has consequently supported United States auto sales, which she describes as “going gangbusters”, and that buoyancy feeds straight through to catalyst loadings. The shift has not been costless for the manufacturers themselves, with Ford, Stellantis and General Motors reporting combined hits of 52 billion dollars last year as their product mix was forced to change, taking Ford and Stellantis into net losses of just over 30 billion dollars between them. For platinum buyers, the read-through is that fabrication demand in the United States is tied to how long the combustion fleet stays in production rather than to electric vehicle adoption curves.

China’s Auto Contraction Offsets United States and European Strength

“Almost all of the contraction that we’re expecting in auto demand on a global basis this year is coming from China”, according to O’Connell, which puts one economy in charge of the global platinum demand balance. She characterizes the Chinese position as one where “it’s really struggling at the moment with their economic activity, and consumer confidence is low”, and autos, as a big ticket item, are among the first categories to suffer. Europe, in contrast, is holding up relatively well given the state of its economy, which leaves the market close to balance overall this year after two or three years of small deficits equivalent to roughly three weeks of global industrial fabrication demand. The risk is that the balance tips wider into surplus next year if China shows no recovery. The same logic works in reverse for anyone positioned further out, because a Chinese recovery releases pent-up demand from the auto and jewelry sectors at the same time.