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A surplus in the platinum market should shrink this year and the palladium and rhodium markets are likely to move back into deficit, Johnson Matthey said in a report.

The three metals are used in auto-catalysts that reduce emissions from vehicle engines, with platinum also used in other industry and for jewellery and investment.

Tight supply of palladium and rhodium has driven prices to record highs in recent years, while ample supply of platinum has weighed on its price. 

Johnson Matthey said it could not reliably estimate how much metal would reach the market from Russia, a major producer, and for that reason it did not give precise surplus or deficit numbers as it has done in previous reports.

Sanctions on Russia since it sent troops into Ukraine in February have not stopped its exports, but Johnson Matthey researcher Rupen Raithatha said it was possible that governments or companies may take further measures that could do so.

Matthey said low production of automobiles due to a semiconductor shortage would dampen demand in 2022 but that supply was also under pressure, with South African output expected to fall.

Platinum demand growth is being driven by its increased use in catalysts for heavy duty trucks and automakers saving money by replacing some palladium with platinum in catalysts for gasoline engines, Matthey said.

It said high prices of palladium and rhodium had caused significant thrifting by Chinese automakers.

Increased supply risk from Russia, the biggest palladium producer, was unlikely to speed up the substitution of palladium in the short term but could in the longer term, Raithatha said.

Automakers “can’t react that quickly on the amount of metal they use this year or even next year, but if the situation (in Ukraine) continues they may have some flexibility to substitute a little bit quicker than they had previously planned,” he said.