HSBC predicts a rally for platinum, as investors will reassess its role in auto catalysts

HSBC urges investors to once again favor platinum as they become “reacquainted” with the role of the metal in auto catalysts, as soon as short-term worries about demand for diesel automobiles fade. 

Analysts at the bank refer to a report from the International Platinum Group Metals Association, a trade organization representing mining, production and fabrication companies in the platinum business, repeating that technology based on platinum group metals helps to meet tight emissions regulations.

With developed fuel injection and engines, and effective emissions controls, clean diesel vehicles meet current and future emissions limits, not to mention delivering high fuel efficiency, the IPA said. Modern diesel cars which require platinum loadings consume less fuel and release 15% less CO2 if compare with their gasoline rivals. They also help car manufacturers achieve the European Union’s 2021 CO2 fleet average targets.

Platinum, palladium and rhodium are coated onto a substrate situated in the exhaust system and serve as catalysts. Metals of this group are essential to facilitating the conversion reactions and are thus instrumental in significantly lowering emissions.

The IPA reports that two primary exhaust elements emerged from diesel engines are particulate matter and nitrogen oxides (NOx). NOx, a by-product from combustion, can be controlled using Exhaust Gas Recirculation, whilst new diesel particulate filters can capture up to 95% of soot.

“We sense that as investors are reacquainted with the usefulness and need of platinum, prices will rally, despite near-term diesel auto concerns,” HSBC says adding that they hardly believe it will hurt palladium which is also expected to be strong.