After a scorching bull run in the last 2 years when prices of precious metals — platinum, rhodium and palladium- surged multi-fold, Covid-19 has destroyed demand, pulling prices down. The recent decline in prices of these metals, while still much higher than their levels two years ago, is temporary and will boom again as demand returns, experts said.
Data from S&P Global Platts suggests over 80% of demand for rhodium and palladium comes from the automotive industry. Implementation of stricter BS6 emission norms, which come into effect in India from April 1, will drive up usage and price of these rare metals, they said.
Platinum, palladium and rhodium are critical for catalytic converters used by automakers to reduce harmful emissions.
“Over the last couple of years, prices of rare metals like palladium and rhodium that act as a catalyst in catalytic converters had increased significantly, rising by several times. This had a direct bearing on the cost of BS6 vehicles and most OEMs were thinking of multiple scenarios to minimize this cost impact,” said Vinay Raghunath, partner, automotive & mobility sector leader, Ernst & Young.
The usage of these precious metals in after treatment systems is increasing due to implementation of stricter BS6 norms. “As share of gasoline vehicles increases, so does the demand for palladium, while rhodium is a supply constraint, due to its very less output during mining”, said Hemant Sikka, chief purchase officer of Mahindra & Mahindra.
Further, the government increased the import duty on these metals by 2.5% in this budget, which is applied on a much higher base price of these metals. So this is a double whammy, adds Sikka.
Since these precious metals are used for cleaner environment, government needs to reduce this duty to pre-budget levels, Sikka added.
Industry experts say the usage is about 7-8 gm per vehicle, working out to Rs 18-22,000 at the current price per vehicle. Chirag Sheth, senior research consultant of Metals Focus, said that with BS6 vehicles coming in April, the loading of these metals in the vehicles will increase. India imports about 7-9 tons of platinum, 4-5 tons of palladium, 1-1.5 ton of rhodium
Prices of these metals have been very volatile. Rhodium price rose from 1870 dollar/oz to peak at 12700 dollar/oz in early March 2020. It saw a reduction in price in the last 23 days at 6500 dollar /oz. It was the same with Palladium; prices halved since early March 2020 at 1665 dollar/ oz. (See table)