PGM use in North America

Three factors — a substantial increase in the production of light vehicles, the impending introduction of tighter emissions standards, and the replacement of some palladium-based catalysts with platinum-based products — led to a 14% rise in the use of platinum in autocatalysts in North America in 2002. However, purchases of the metal fell by 28%, year over year, to 570,000 oz. as U.S.-based car companies fulfilled a significant proportion of their requirements through the use of platinum-group-metal inventories.

The U.S. economy performed erratically in 2002. Strong growth in the gross domestic product in both the first and third quarters led analysts to speculate that an enduring recovery might be under way. And yet on each occasion, the optimism quickly evaporated as second- and fourth-quarter growth was poor. Against this background of economic uncertainty, a 1% fall in light vehicle sales from the high levels of 2001 could be considered a good result. U.S.-based manufacturers supported sales with a range of aggressive promotions and incentives, including interest-free financing.

On the production side, the need to rebuild car inventories at dealerships drove a strong increase in the manufacturing rate in the first half of the year. This, together with the solid level of sales, caused production of light vehicles to rise by almost 6.9% to more than 12.3 million vehicles.

The swift fall in the palladium price plus the rise in the price of platinum during 2002 greatly reduced the justification for switching from heavy use of the former to greater use of the latter. Nevertheless, programs to reduce dependence on palladium that were introduced in 2000 and 2001 by several automakers continued to have a positive effect on platinum demand last year.

Counteracting these positive factors for platinum demand was the depletion of significant stocks of PGMs held by U.S. automakers. The big U.S. auto companies made huge inroads into these inventories in 2002 as part of their intensive efforts to minimize costs and improve cash flow. Consequently, purchases of platinum fell even though the underlying use of the metal continues to rise.

— The preceding is an excerpt from Platinum 2003, an annual publication of London-based Johnson Matthey.