VW emissions scandal and the platinum price

BMW, Tata, even Volvo? Right now you’re probably happy if you’re driving anything other than a VW. Unfortunately, if you’re South African, speculate in precious metals or have shares in platinum miners, then you need to watch what’s happening with the emissions scandal even if you don’t drive a car. Platinum is used as a catalyst to help remove auto pollutants (around 4-6 grams per diesel car). Cars make up around 44% of the total demand for platinum (vs. 34% for jewellery and 2% for industry) and South Africa has around 80% of the world’s total reserves of platinum. So any drop in the price of the metal (which is down around 28% anyway this year) is bad for SA, miners and anyone that holds the metal.

But surely they now need to use even more platinum to reduce pollution...?

Maybe. The problem is that platinum is used mainly in diesel cars, while palladium is used in petrol cars. Companies like VW have been lobbying governments and people hard to use diesel cars on the basis that they are better for the environment. As that story unravels petrol cars start looking like the more eco-friendly bet. Any big shift form diesel to petrol would be bad for platinum demand

(Bloomberg, Reuters, Sky News, various others). 

ANDREW LOUW CFA

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