Why VW scandal boosted palladium and damped platinum - ETF Securities

Both platinum and palladium were affected in the aftermath of the Volkswagen scandal. Both are used in vehicle production, however, they did not act like sister metals.

The two silvery white metals are used in catalytic converters, which help control harmful emissions coming from car exhausts, but platinum is notably used for diesel vehicles while palladium is used for gasoline ones.

Yesterday, platinum prices settled at their lowest level since 2009, while palladium soared to its highest price in two months.

“Before the VW scandal, diesel vehicle interest in the world’s largest market, Europe, was diminishing, notably due to poor emissions and the declining price for petroleum,” said Mike McGlone, director of research for ETF Securities.

The carmaker crisis has aggravated that trend, and it may be lowering demand for diesel machines and increasing demand for gasoline vehicles, thus there is likely more need for more palladium, he said, adding that very little platinum is used in gasoline vehicles.

INTL FCStone has also highlighted the same trend, pointing to a blow platinum had to take.

According to Stillwater Palladium, diesel engines operate at lower temperatures than gasoline engines and platinum fits better as a catalyst to decrease harmful emissions at lower temperatures.

Meanwhile, China has said it would reduce pollutions, including harmful vehicle emissions.

Smaller gasoline cars are prevalent in China, which could mean more palladium use, said McGlone. That may mean, in turn, a luck for palladium investors.

The amount of palladium used per vehicle needs to be increased to help reduce emissions, or these gasoline-powered vehicles need to be replaced with electric ones “to be on par with most Western manufacturers,” he said.

A day earlier, research firm Bernstein predicted that the Volkswagen crisis would end the era of diesel cars in Europe, which would be beneficial for electric carmakers like Tesla.