Autocatalysts taking masses of platinum.

Autocatalysts taking masses of platinum

In Poland, children and adults seek sanctuary in a salt mine more than 500 feet below the earth's surface to escape the charcoal-colored skies.

In Mexico, pregnant women on foreign duty take heed of government advice to refrain from childbearing

In Bombay, the mere "luxury" of breathing is compared to smoking 10 cigarettes a day.

The global threat of air pollution, needless to say, is generating concern from all corners of the world. Pollution created from automobiles is the one giant culprit being singled out and subjected to a variety of global regulations that could have an impact on markets.

In the quest for a "greener" environment, demand for platinum and platinum-group metals (PGMs) will increase dramatically, according to industry sources.

Estimated platinum offtake for emission control catalysts alone is expected to be 1.724 million oz. by 1994, according to the 1990 Shearson Lehman Hutton annual review of the platinum industry. The autocatalyst should account for 41% of total platinum fabrication by the early 1990s, surpassing the jewelry sector, which was the dominant platinum user in the 1980s. This compares with 1.186 million oz. in 1989 and does not take into account Eastern Europe, which is said to be the most heavily polluted region in the world.

"Platinum consumption increased for North American autos in 1989 vs. 1988 by 4.3%, while car sales fell 6.6%," notes Nina A. Lipton, vice president of marketing and research for Platinum Guild International (USA) Inc. in New York.

The United States is looking to further limit automotive exhaust gases in the footsteps of more rigid California clean air standards.

"The public opinion is that everyone wants a clean air amendment and (environmentalists) are continuously pushing for tighter clean air standards," notes Lee J. Marino, manager of public affairs in the autocatalyst department at Johnson Matthey in Wayne, Pa.

However, Marino says the pending U.S. Clean Air Bill will most likely be subjected to a lame-duck session because of differences in House and Senate bills. Although the Senate bill is more stringent, it does not call for the requirement of alternative fuels.

In Europe, the European Community (EC) is likely to approve legislation requiring more expanded use of platinum-based catalysts.

"We expect an increase in platinum use for the autocatalyst for two reasons: (1) The European legislation will be changed (to fit larger cars with autocatalysts) and (2) they are also developing catalysts for diesel engines," says Dr. Egbert Lox, manager of research and development of emission control catalysts for Degussa, a large precious metals company in Frankfurt.

Expanding beyond U.S.-EC catalyst-based off-take, the tumbling of the Berlin Wall has opened up another market for platinum in Eastern Europe. Lipton says industry estimates call for a total platinum off-take of about 500,000 oz. there by 1995.

"There are no figures for Eastern Europe, so it's hard to put it in perspective," says Rhona O'Connell, a precious metals analyst for Shearson Lehman Hutton's London metals and mining research department. "But it should be promising in principle following the GM (General Motors) announcement that it will be working with the Soviets. That's a decent springboard."

Third World countries are also feeling the effects of massive pollution problems and, in response, are stepping up restrictive legislation.

"More countries will apply after-emission standards," Lox says. "Brazil and Mexico are two of many."

Even motorcycles in Hong Kong are facing rules requiring autocatalysts, Lipton adds.

To compensate for this explosion in global platinum demand, various South African mining companies plan to expand operations.

"The mines could see three years ago that the European autocatalyst market would grow substantially. The mines have been struggling to meet demand, and that will be the situation for the next two years," says Dr. Michael C.F. Steel, market research manager for Johnson Matthey in London.

Most of the estimated 1 million oz. increase from new mines coming onstream will go to prior commitments.

"The bottom line is, yes, new supplies are expected to come onstream by 1995-96, but a good part of that has been accounted for," Lipton points out.

Steel adds that there is a potential for a growing surplus with the new mines coming onstream but that increasing demand from various sectors may indicate the surplus will not be very significant.

Furthermore, the mining process itself is very difficult and tedious. Some mines slated to come on-line by the mid-1990s may be delayed due to deeper digging.

Lipton calls the process a "labor-and capital-intensive chore." It takes six months to get the metal out of the ground and refine it if all goes according to schedule. The new mines themselves take about five years to become fully operational.

O'Connell sees an increase of 15% to 20% in PGM off-take alone by the mid-1990s. For platinum, she says, that would "sustain higher prices with a worst-case scenario of $500" per oz.

The platinum recovery process may provide a floor for platinum prices. If the industry continues to expand, it may also provide a ceiling. According to Lox, recovery costs run in the neighborhood of $475 per oz.

"The recovery of platinum has become very active over the last three years. I tend to think this will affect platinum prices," Lox says. "It is clear this will become even more important in the years to come."